The Great Gap: Inequality and the Politics of Redistribution in Latin America 9780271073910

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THE GREAT GAP

THE GREAT GAP In e qual ity and the Politics of Redistribution in Latin America

Edited by MERIKE BLOFIELD

The Pennsylvania State University Press University Park, Pennsylvania

Th is book has been published with the assistance of The Ford Foundation. Library of Congress Cataloging-in-Publication Data The great gap : inequality and the politics of redistribution in Latin America / edited by Merike Blofield. p. cm. Includes bibliographical references and index. Summary: “A collection of essays addressing the relationship between inequality and politics in Latin America. Examines the socioeconomic context and inequality of opportunities; elite culture, public opinion, and media framing; capital mobility, campaign financing, representation and gender equality policies; and taxation and social policies”— Provided by publisher. ISBN 978-0-271-05009-6 (cloth : alk. paper)— ISBN 978-0-271-05010-2 (pbk. : alk. paper) 1. Equality—Latin America. 2. Income distribution— Latin America. 3. Latin America—Economic conditions— 1982– 4. Latin America—Politics and government— 1980– 5. Latin America—Social conditions—1982– I. Blofield, Merike. HC130.I5G74 2011 339.2098—dc23 2011031149 Copyright © 2011 The Pennsylvania State University All rights reserved Printed in the United States of America Published by The Pennsylvania State University Press, University Park, PA 16802-1003

The Pennsylvania State University Press is a member of the Association of American University Presses. It is the policy of The Pennsylvania State University Press to use acid-free paper. Publications on uncoated stock satisfy the minimum requirements of American National Standard for Information Sciences—Permanence of Paper for Printed Library Material, ANSI Z39.48–1992. Th is book is printed on Natures Natural, which contains 50 post-consumer waste.

contents

Preface and Acknowledgments

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Introduction: Inequality and Politics in Latin America 1 Merike Blofield part 1: the socioeconomic context chapter 1 | Fault Lines in Latin American Social Development and Welfare Regime Challenges 21 Fernando Filgueira chapter 2 | Inequality of Opportunity in Latin America: Economic Well-Being, Education, and Health 58 Anna Crespo and Francisco H. G. Ferreira part 2: elite culture, framing, and public opinion chapter 3 | Elite Perceptions of Poverty and Inequality in Brazil Elisa P. Reis

89

chapter 4 | Media Diversity and Social Inequality in Latin America Sallie Hughes and Paola Prado

109

chapter 5 | Public Opinion on Income Inequalities in Latin America 147 Merike Blofield and Juan Pablo Luna part 3: agenda setting and the politics of inequality chapter 6 | The Politics of Redistribution in Less Developed Democracies: Evidence from Brazil, Ecuador, and Venezuela 185 Daniela Campello

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chapter 7 | Inequality and the Cost of Electoral Campaigns 217 Maurício Bugarin, Adriana Cuoco Portugal, and Sergio Naruhiko Sakurai chapter 8 | Shallow States, Deep Inequalities, and the Limits of Conservative Modernization: The Politics and Policies of Incorporation in Latin America 245 Fernando Filgueira, Luis Reygadas, Juan Pablo Luna, and Pablo Alegre Chapter 9 | Gender Equality Policies in Latin America Merike Blofield and Liesl Haas

278

part 4: taxation and social policies chapter 10 | Tax Reforms and Income Distribution in Latin America 313 James E. Mahon Jr. chapter 11 | Are Coalitions Equally Important for Redistribution in Latin America? The Intervening Role of Welfare Regimes 348 Juliana Martínez Franzoni and Koen Voorend Conclusion: Inequality and the Politics of Redistribution 377 Merike Blofield Contributors 391 Index 397

preface and acknowledgments

This book forms part of the activities of the Observatory on Inequality in Latin America, which was made possible by a grant from the Ford Foundation. The three-year grant (2007–9) established the Observatory on Inequality in Latin America at the Center for Latin American Studies at the University of Miami (see www.observatoryla.org). It also allowed me, as director of the observatory, to pursue an edited volume on inequality and politics in Latin America. I recruited specialists to write chapters on specific dimensions of inequality and politics in the region, and we held two intensive, two-day workshops in November 2007 and May 2008 under the auspices of the Observatory on Inequality in Latin America. Our goal has been to provide a systematic, original, and well-researched volume on the relationship between inequality and politics in Latin America. I was extremely lucky in that most scholars accepted my offer to join the volume, and we had a terrific group of contributors. Our chapters benefited immensely from the two workshops because they enabled us to share our research, to get constructive feedback, and to forge a common framework. This volume, combining a multidisciplinary approach to the politics of inequality and redistribution with a theoretically coherent framework, is the result. Aside from the group of contributors, this project would not have been possible without the support of many outstanding individuals. The proposal for the observatory was written with the support of a group of senior colleagues from the Center for Latin American Studies at the University of Miami (Felipe Agüero, Bruce Bagley, Bill Smith, and Steve Stein), was submitted to the Ford Foundation during the fall of 2006, and was approved soon thereafter. After Felipe Agüero moved back to Chile, Bruce Bagley and Bill Smith continued to provide invaluable help in supporting my efforts. José Flores, the administrative assistant, was responsible for organizing the logistics of both workshops. I would also like to extend my heartfelt thanks to Augusto Varas, the former director of the Ford Foundation in Chile, and the current director, Martín Abregú, for providing their support to this endeavor. For intellectual inspiration, aside from the collective efforts of the contributors and the Ford Foundation, I would like to thank Evelyne Huber, Jonathan Hartlyn, Claudio Fuentes, and Sandy Thatcher, at Penn State until

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Preface and Ac know ledg ments

2010. A seminar held by Fundación Equitas in Santiago, Chile, in August 2008, and a panel presentation at the Latin American Studies Association in 2009 in Rio de Janeiro, also provided stimulating feedback. Credit for the title of the book goes to Juan Pablo Luna. Finally, I would especially like to thank Felipe Agüero, who first developed the idea of the Observatory on Inequality. I am honored that he decided to recruit me to develop the idea further. This book is one of the results. Miami, July 2010

Introduction: Inequality and Politics in Latin America Merike Blofield

The relationship between socioeconomic inequality and democratic politics has been one of the central questions in the social sciences from Aristotle on. Recent waves of democratization, combined with deepened global inequalities, have made understanding this relationship ever more crucial. Indeed, we can see a current surge of interest in the relationship between inequality and democracy, as indicated by the Fall 2009 issue of PS: Political Science and Politics, which published a symposium, “Inequal ity and Politics in Developing Countries,” edited by John Echeverri-Gent and with contributions from leading scholars, and by Nancy Bermeo’s thoughtful piece titled “Does Electoral Democracy Boost Economic Equality?” in the October 2009 issue of the Journal of Democracy. A general conclusion of both of these sources is that we do not have many generalizable theories about the relationship between the two, partly because reality is very complex, and partly because of lack of systematic research on the issue. This book seeks to address this relative dearth of theories and to contribute to understanding this relationship by providing an interdisciplinary but systematic and theoretically tied analysis of inequality and politics. We focus on the region with the highest socioeconomic inequalities in the world, combined with more than twenty years of formal democratic politics: Latin America. With this regional focus, we engage in midlevel theorizing, and we hope that scholars studying other regions of the world are inspired to review our findings and examine whether and how they may apply to the rest of the world. Latin America has now experienced more than twenty years of elected democratic governments (with, of course, the prominent exception of Cuba). The region is rich in natural resources, and the United Nations classifies most of its countries as “middle-income.” Nonetheless, tremendous socioeconomic inequalities have relegated a significant sector of the population to economic

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and social deprivation, with 189 million people living in poverty in 2009 (CEPAL 2009). Deep socioeconomic inequalities have been an entrenched characteristic of Latin American countries since colonization. What is striking is that they have persisted despite more than two decades of formal democratic politics. On a very basic level, we would expect that if democratic politics are superimposed on highly unequal societies, the majority would vote for and demand redistribution, and policies would follow (Meltzer and Richard 1981). However, despite slight improvements during the first decade of the twenty-first century in many countries (López-Calva and Lustig 2010), these inequalities remain extremely high (CEPAL 2009), and the highest of any region in the world (see the figures later in the chapter). This is partly, no doubt, because of the dramatic concurrent socioeconomic and technological changes the region has undergone in the past twenty years that have affected inequalities. What is clear, in any case, is that democratic elections on their own have not led to significant reductions in inequality, and the relationship between socioeconomic inequality and democratic politics is much more complex (Boix 2003; Weyland 1996). Why have elected governments not done more to reduce these inequalities? What are the mechanisms by which the inequalities themselves may affect the political process? These are the central questions this book seeks to answer. There is a growing normative recognition among international organizations and policy makers that inequality has hindered democratic consolidation and the quality of democracy in Latin America (UNDP 1995, 2004; ECLAC 2000; De Ferranti et al. 2003; Márquez et al. 2008). The United Nations Summit on Social Development (UNDP 1995) forged a worldwide consensus among political leaders on poverty, unemployment, and social exclusion as primary concerns for policy makers. It committed governments, among other things, to “promote the equitable distribution of income and greater access to resources through equity and equality of opportunity for all.” A follow-up report by the Economic Commission for Latin America and the Caribbean, aptly titled The Equity Gap, found “glaring shortcomings” in the region’s efforts to combat unemployment, poverty, and social exclusion (ECLAC 2000, 9) and identified socioeconomic inequality as one of the key barriers. The Report on Democracy in Latin America of the United Nations Development Programme identified “inequality and poverty as [democracy’s] main weaknesses” (UNDP 2004). In addition, both the World Bank and the Inter-American Development Bank have published important reports on inequality and social exclusion that recognize their negative impact on economic development and democratic politics (De Ferranti et al. 2003; Márquez et al. 2008). What are the effects of these inequalities? On the most basic level, they reduce the standard of living and quality of life of the poor and prevent them

Introduction

3

from achieving their full human potential. More broadly, they also prevent them from interacting with those around them in conditions of basic dignity and from actively participating in democratic politics. A growing body of recent scholarly articles has analyzed the effects of high inequalities and class divisions on social participation, the quality of democracy, and democratic governance (Bellone Hite and Viterna 2005; Benhabib and Przeworski 2006; Huber, Pribble, and Stephens 2008; Huber 2009; Karl 2000; Kaufman 2009; Korzeniewicz and Smith 2000; Kurtz 2004; Portes and Hoffman 2003; Przeworski and Meseguer 2005; Roberts 2002; Weyland 2004). Several edited volumes in the past two decades have also addressed the high levels of inequality in Latin America (Chalmers et al. 1997; Gottschalk and Justino 2006; Tokman and O’Donnell 1998). These books are extremely useful contributions, but they remain quite broad in scope and tend to be more descriptive (with the partial exception of the 2006 volume). The publication of López-Calva and Lustig’s edited volume (2010) titled Declining Inequality in Latin America: A Decade of Progress? promises to add to the debate. Its contributors analyze the determinants of a moderate decline in inequality between 2000 and 2007 in the region, with case studies of four countries. Although the volume analyzes inequality as a dependent variable, the introduction by López-Calva and Lustig and Robinson’s chapter in the volume also discuss the political implications of high inequalities. Finally, several single-author books have also addressed inequality more directly. Kurt Weyland’s excellent book Democracy Without Equity (1996) examines the domestic factors, particularly organizational fragmentation, that impede redistributive reforms in highly unequal societies, using Brazil as a case study. Carles Boix’s book Democracy and Redistribution (2003), on the other hand, provides a compelling frame for thinking about the mechanisms by which capital mobility affects demands for income redistribution in contemporary democracies (and which Campello in chapter 6 takes to task). Daniel Brinks’s book on inequality, the rule of law, and police violence (2008) examines the relationship between socioeconomic and legal inequality and the crucial mediating role of political factors in it. In general, more books have begun to analyze the links between the socioeconomic context and the political process, even if they have not addressed socioeconomic inequality directly. Despite these contributions and the growing recognition of the importance of inequality for politics, as evidenced by the PS: Political Science and Politics 2009 symposium, there is still a relative dearth of systematic, comparative research on whether and how socioeconomic inequalities in the region are filtered through elite culture, public opinion, and framing; how they influence agenda setting and representation; and how they affect public policies. This book seeks to provide a framework with which to examine these different

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facets of the relationship between inequality and politics, drawing on specialists from political science, sociology, economics, and communications. In this book, we take socioeconomic inequality—understood as the distribution of income and resources, as well as class structures and status hierarchies—as a causal or independent factor that may shape political processes and outcomes. We examine whether and how socioeconomic inequality affects politics and policy options in concrete ways. In the process, we address two broad questions: whether and how socioeconomic inequalities maintain themselves through (or despite) democratic politics, and whether and how such inequalities may, over time, foster political constraints or create opportunities in the form of political coalitions to address those inequalities. In doing so, we pay special attention to the impact of inequality on political processes regarding redistribution. We ask the following questions: How does inequality shape the relative power of elites and dominant social classes, on the one hand, and the interests of those elites and classes, on the other? How does inequality shape the power and interests of subaltern classes and groups? Are there mechanisms in highly unequal societies that constrain the political system from addressing and alleviating those inequalities even in the context of formal democratic politics? If so, how do these causal mechanisms operate? With this focus and these questions, we seek to address inequality as the deep-seated problem that it is in the region, and also to take into account the new contingencies—specifically, the political shift to the left in many countries—that have developed in the region during the past decade. In addition to the introduction and conclusion, there are eleven substantive chapters in this volume, divided into four parts. Part 1 contains two chapters that discuss the socioeconomic context, outlining, first, the historical and sociodemographic changes, and second, the inequality of opportunities in the region. Part 2 addresses elite culture, public opinion, and media framing with the broad question: How does inequality affect social perceptions and framing on inequality and redistribution? Part 3 addresses agenda setting and the politics of inequality by looking at capital mobility, campaign financing, and political representation, as well as a case study of a concrete policy area: gender equality policies. It asks the broad question: How does unequal access to resources influence political agendas on inequality and redistribution? Part 4 examines taxation and social policies with the question: How do extant inequalities affect public policies on redistribution? The conclusion brings together the main findings of the chapters and discusses both theoretical and policy implications. In the remainder of this introduction, I first chart the main characteristics and trends of inequality and class divisions in the region. I then provide an overview of the chapters in this volume.

Introduction

5

Inequality in Latin America Latin America has undergone two major transformations since the 1980s: from authoritarian regimes to democratically elected regimes, and from stateled development models to neoliberal development models. In sociological terms, the region moved away from state-based incorporation to market-based incorporation, which has in the majority of countries significantly reduced the role of the state in the economy and broadened the reach of the market (chapters 1 and 8, this volume; Roberts 2002). Both of these transformations reflect broader global changes; however, region-specific characteristics—most notably, the deeply entrenched inequalities—have made the specific contours of these changes unique. The most common measures of economic inequality are the Gini index and the share of national income received by the top decile and top quintile of the population. The Gini index mea sures income distribution across the quintiles; the other two are direct measures of concentration of income within the elite. Figures I.1–I.3 outline inequality trends in the region. Figure I.1 compares the country average of the Gini index in Latin America with that index in advanced industrialized countries and other developing regions in the world. The Gini index is bounded from zero to one; the higher the value, the more unequal income distribution is. Figure I.1 indicates that the regional average for the Gini index in Latin America is much higher than in most other parts of the world. The only other region that approximates Latin America’s high inequality is sub-Saharan

0.6 0.5 Latin America

0.4

High-income countries 0.3

Eastern Europe and Central Asia East Asia and Pacific

0.2 Middle East and North Africa Sub-Saharan Africa

0.1 0 Gini, 1990s

fig. I.1 Gini index averages for developing regions and high-income countries. Source: World Bank data derived from Ferreira and Ravallion (2008).

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the great gap

0.7 0.6 0.5 0.4 1990 0.3 1998–1999 0.2

2003–2005

0.1 Brazil

Bolivia

Colombia

Nicaragua

Paraguay

Honduras

Chile

D.R.

Guatemala

Peru

Argentina

Mexico

Ecuador

Panama

El Salvador

Venezuela

Uruguay

2006–2008 Costa Rica

0

fig. I.2 Income inequality (in Gini coefficients) in Latin American countries, 1990–2008. D.R. = Dominican Republic. Source: Derived from CEPAL (2009).

Africa, hardly a propitious development comparison. High-income countries are on average significantly more equal than Latin America. Figure I.2 shows the changes in the Gini index from 1990 to 2008 (or the latest year for which data are available) in individual Latin American countries, drawing on data from the United Nations Commission for Latin America and the Ca ribbean (CEPAL/ECLAC). It allows us to compare Latin American countries with one another, as well as over time. The countries are loosely ordered from least to most unequal. Although there appears to be no dominant trend over time, the data from CEPAL/ECLAC indicate that overall, the Gini index remained stable or increased during the 1990s in most countries and then slightly decreased during the first decade of the twenty-first century. If we compare 1990 with the latest year of available data (up to 2008), the Gini index has increased in Costa Rica, Ecuador, Argentina, Guatemala, Paraguay, and Bolivia, while in all other countries it has decreased. However, as the data show, there have sometimes been dramatic country-specific fluctuations between these two dates. Indeed, these data must be approached with caution; changes in data collection and methods during this period in some countries make it difficult to place too much confidence in the data, especially in minor fluctuations. However, we can confidently conclude from the data in figure I.2 that overall and compared with the rest of the world, the Gini index has remained high across the region during the past two decades. Only five countries had Gini values that were lower than .50 in 2008 (Uruguay, Costa Rica, Venezuela, Ecuador, and Peru). In the Dominican Republic, Honduras, Guatemala, Paraguay, Bolivia, and Brazil, the Gini index was above 0.55 in 2008; in Colombia, it was 0.58 for 2005, the latest year of available data. Finally, despite

Introduction

7

50 45 40 35 30 25 20 15 10 5 Uruguay Venezuela Costa Rica Argentina El Salvador Mexico Peru D.R. Ecuador Honduras Panama Guatemala Brazil Chile Paraguay Colombia Bolivia

Denmark Japan Germany Sweden Finland Austria Norway Canada France Australia Switzerland Greece Spain Italy Ireland New Zealand Belgium U.K. Portugal U.S.

0

fig. I.3 Income share () received by top 10 of the population, advanced industrialized countries and Latin America. D.R. = Dominican Republic. Source: Derived from United Nations, Human Development Report, 2007–2008.

overall high levels, there is also variation within the region, from Uruguay and Venezuela at the low end to Guatemala and Brazil at the high end. Figure I.3 outlines the share of income received by the top 10 of the population and thus gives us an idea of how concentrated income is in the very upper echelons of society. For a comparative perspective, I include advanced industrialized countries in figure I.3. Figure I.3 reveals the difference in the elite share of income between Latin America and the advanced industrialized countries. In the advanced industrialized countries the income share of the top decile fluctuates between 20 and 30, but in Latin America it ranges from 34 in Uruguay to 47.2 in Bolivia, with Colombia, Brazil, Chile, and Paraguay very close behind. These differences between the two groups of countries demonstrate just how highly concentrated income is among a very small elite in Latin America. In sum, all these measures confirm a similar trend in Latin America: very high levels of inequality compared with other regions, across countries, and over time. These measures, of course, tell only part of the story. For one thing, they did not measure wealth. We also need a more qualitative assessment of the data. Economic inequal ity is one of the key forms of inequality in mediating people’s access to distinct life opportunities in Latin America. Inequalities, however, are more than economic and include how political, economic, social, and cultural structures and institutions perpetuate stratified hierarchies and unequal relations of power among different social groups and hinder their opportunities for self-fulfillment.

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Class divisions, for example, are economic; they are explicitly tied to market relationships in capitalist societies (Portes and Hoffman 2003, 42–43). However, they tend to be reinforced by different types of social inequalities. Indeed, research indicates that economic inequalities are strongly correlated with social inequalities such as geographic segregation and unequal access to education and health care (see chapters 1 and 2, this volume; De Ferranti et al. 2003; Márquez et al. 2008). Hence, although our focus is on economic inequalities, we are cognizant of the interactive effect of economic and social inequalities. Portes and Hoffman (2003) divide the urban class structure in Latin America into capitalists, professionals, executives, petty entrepreneurs, formal workers, and informal workers. The size of the three dominant classes (capitalists, professionals, and executives) combined is small, ranging from 5 of the population in El Salvador and 5.2 in Brazil to 9.5 in Chile and 13.9 in Venezuela (Portes and Hoffman 2003, 52). Their share of the income and wealth in the region, however, is high; Portes and Hoffman find that “all the excess income inequality of the region” is attributable to the combined income of this group (Portes and Hoffman 2003, 58–59), which, as figure I.3 indicates, is in many countries almost half the national income and far above that of its counterparts in other regions of the world. Informal workers, on the other hand, are the largest class in population in all Latin American countries (Portes and Hoffman 2003, 53). They are those who are “excluded from modern capitalist relations and [who] must survive through unregulated work and direct subsistence activities” (53). The urban informal sector is an indicator of the fragility of market-based incorporation; it absorbs people and enables them to survive, although mostly very precariously and with little access to formal social safety nets. The majority of these workers do not make enough income to surpass the poverty level, and this sector has exploded in recent decades to encompass nearly half of the region’s population (Portes and Hoff man 2003). Although the informal sector has functional purposes, its heterogeneity also makes it extremely hard for people to come together, organize collectively, and participate and advocate for their interests on the political level (Centeno and Portes 2006; Portes and Hoffman 2003; Roberts 2002). These class divisions have been reinforced by the lack of intergenerational mobility. Studies show that there is little upward mobility and little downward mobility from the elite in Latin America (although more mobility from the middle classes); that is, the poor stay poor, and the rich stay rich (Gavíria 2006; Márquez et al. 2008). Aside from inefficient use of human capital, this lack of intergenerational mobility fosters what Karl (2000, 153) refers to as a “dualist world” and what we refer to as “social distance” between individuals from different classes. It also contributes to what the Economic Commission for Latin America and the Ca ribbean calls “psycho-social divides”: the

Introduction

9

separation of socioeconomic strata “in terms of their expectations of social mobility, confidence in state institutions, citizen participation and perceptions of being discriminated against. These divides are the subjective correlates of poverty and inequity” (ECLAC 2007, 20). Many scholars, practitioners, and policy makers have focused on developing, analyzing, and measuring a related concept, social exclusion. Social exclusion is defined by the Inter-American Development Bank as “an inefficient and dysfunctional dynamic social, political, and economic process whereby individuals and groups are denied access to opportunities and quality ser vices to live productive lives outside poverty” (Márquez et al. 2008, 5). Although social exclusion as a concept is clearly related to socioeconomic inequality, we prefer here to center our discussion specifically on inequality because it explicitly focuses on the “socially included” as well, who are clearly an important factor given the high share of income of the elites in Latin America. One of the key questions we explore is the role of the socially included in maintaining or reducing social exclusion. How do these inequalities and class divisions affect mobilization, framing, agenda setting, and public policies? Under what conditions do they bind groups of people together to recognize shared interests? These inequalities and class divides pose significant challenges for nations and their governments to achieve a social consensus on the role of the state in society and to develop feasible and inclusive public policies. Latin America has societies with weak middle classes, exorbitant socioeconomic power in the very elite, and a large, unincorporated informal sector in most countries. Historical and comparative experiences indicate that this is a difficult context for democracies to consolidate in and for political institutions to be of high quality; instead, what we see are what O’Donnell (2004, 55) calls “low-intensity democracies.” The key actor in mediating these inequalities and the relationship between the socially included and excluded is the state. Political parties aggregate and represent citizen preferences on the political level, the executive and legislators pass policies, and bureaucracies implement them. Hence to understand how inequalities are maintained or changed, we need to understand whether and how they are politicized, how political actors address them, and what policies maintain or reform them.

The Focus of This Book Part 1: The Socioeconomic Context

Part 1 discusses the socioeconomic foundations of the political constraints and opportunities confronting contemporary Latin American countries,

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highlighting both broad similarities and important differences across the region. In chapter 1, Fernando Filgueira takes a macrosociological approach and makes two central arguments regarding inequality in Latin America. First, through quantitative analysis of a global database, he shows that the region clusters together because of a set of traits that separate Latin American countries from the rest of the world. These traits include high levels of inequality, the highest combined dependency ratio of active to nonactive population, and a larger percentage of urban dwellers than in other countries with similar levels of economic and social development. Second, he argues that Latin America presents overlapping demographic and labor-market transitions. A region that is getting older, transforming its family patterns, incorporating women into the labor market, and moving to an increasingly service-based economy is at the same time a region that never fully finished its first demographic transition and never achieved a fully formal labor market. The roots of these overlapping socioeconomic stages can be traced to both the levels and forms of inequality in the region. Confronting these patterns of inequality is no easy task. These patterns, he claims, have metastasized in the social structure, making gender, racial/ethnic, generational, and other sources of inequality harder to deal with both politically and technically. Filgueira ends by suggesting some redistributive strategies and social policy instruments, anchored in what has been termed “basic universalism,” that he believes are viable both technically and politically as a means to confront these inequalities. In chapter 2, Anna Crespo and Francisco H. G. Ferreira shed light on the determinants of inequality from a different perspective and level of analysis by examining the role of inequality of opportunities in Latin America. They argue that two diverse sources of inequality can be identified. One source is related to individuals’ circumstances (i.e., all exogenous factors that are given to them and are generally beyond their control), and the other comes from choices individuals make, given their circumstances. The first source is what has been identified as inequality of opportunities. The authors, drawing on extant data and studies, find that predetermined characteristics account for at least 35 of the total inequality in earnings and 50 of the total inequality in consumption. Inequality in educational achievements and inequality in nutritional status of children in the region can also be largely explained by inequality of opportunity. A comparison with developed countries suggests that although there is some variance, Latin American countries are in general significantly more opportunity unequal. Both chapters in part 1 point to the importance of inequality of opportunities and to the technical and political barriers to addressing it.

Introduction

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Part 2: Elite Culture, Framing, and Public Opinion

Socioeconomic inequalities are deep in Latin America and have a profound impact on inequality of opportunities. Why have they not been politically addressed more forcefully? Social scientists have referred to the “dualist world” (Karl 2000, 153) that wealth and income inequalities in Latin America have created or maintained and the corrosive impact these inequalities have on fostering a sense of “common belonging” (Vilas 1997, 23) and “broad and effective solidarity” (O’Donnell 1998, 55), all essential to the quality of democracy. The chapters in part 2 explore several of these claims by examining the relationship between inequality and elite culture, media framing of individuals in different positions of power, and public opinion on inequality and redistribution. They also discuss how these factors allow inequalities to be perpetuated, and where there may be opportunities for reform. In chapter 3, Elisa P. Reis discusses the values of different elite sectors in Brazil, using survey data, in-depth interviews, and press material. The author stresses the relevance of research on the consequences of poverty for those social segments that control material and symbolic resources. Inspired by de Swaan’s (1988) analysis of the origins of the welfare state in Europe as the long-term result of the way the elites found a collective solution to the threats posed by poverty, she seeks to grasp how those who hold leadership positions in Brazil perceive poverty and inequality. She finds that although elites consider both inequality and poverty to be problems, they do not view themselves as responsible for contributing to a solution. They tend to see crime and violence as the main threats posed by inequality, and education as the solution to it. Taking these views into account, Reis discusses the implications for distributional coalitions and social policy in Brazil and elsewhere in the region. In chapter 4, Sallie Hughes and Paola Prado argue that concentrated and biased media systems in Latin America foster an “inequality equilibrium” that makes distributional reform more difficult. They outline media diversity (in both structure and content) and policy making in the region, compare them with advanced industrialized democracies, and conduct analysis in greater depth in Chile, Uruguay, Mexico, and Costa Rica. Although variation exists, the general pattern in Latin America’s media systems is one of concentrated commercial sectors and weak public and civic media sectors, difficult citizen access to diverse media, and content that tends to reflect the views and interests of more powerful groups in society. They conclude by discussing systemic arrangements that could increase media diversity in content and framing on issues that differentially affect the rich and poor. In chapter 5, Merike Blofield and Juan Pablo Luna examine public opinion toward inequality and redistribution in Latin America and compare it with

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opinion in OECD countries, drawing on World Values Survey data. In Latin America, they fi nd increased polarization in attitudes toward inequal ity and redistribution over time (that is, a higher share of people tending toward extreme views in both directions), as well as increased numbers of people demanding more redistribution while a minority continues to demand larger differences. This is in stark contrast to advanced industrialized countries, where there is a social consensus about the status quo or a moderate desire for more redistribution. They examine the determinants of these differences and find that while in OECD countries attitudes are linked to left-right ideology, in Latin America attitudes are less coherent, and the most consistent predictor is an individual’s class position. They conclude by discussing the implications for building political coalitions supportive of redistribution. Part 3: Agenda Setting and the Politics of Inequality

Part 3 examines agenda setting on redistributive issues. It is generally recognized that poor people’s issues tend to have a harder time making it onto the political agenda in advanced industrialized democracies (Bachrach and Baratz 1970). This may be even more the case in highly unequal democracies, where elites command a highly disproportionate share of economic resources. The chapters in this part look at whether and how agenda setting on inequality and redistribution is affected by and filtered through four dimensions: global capital markets; campaign financing; political representation and the current “shift to the left”; and a case study of gender equality policies. In chapter 6, Daniela Campello suggests a mechanism through which capital mobility associated with financial globalization constrains governments’ capacity to redistribute income in Latin America. She challenges Boix’s (2003) claim that in open democracies, poor voters refrain from overtaxing the wealthy in order to prevent capital flight by showing that Latin American voters quite often elect candidates who campaign on promises to promote income redistribution and social justice. Whenever these presidents are subjected to speculative attacks, however, they tend to betray campaign promises and to switch to a neoliberal agenda in order to reattract investors to the economy. The author adduces evidence from Brazil, Ecuador, and Venezuela to illustrate the argument presented. In chapter 7, Maurício Bugarin, Adriana Cuoco Portugal, and Sergio Naruhiko Sakurai explore theoretically and empirically the effects of inequality on the cost of electoral campaigns. An electoral-competition model suggests that electoral campaign costs increase with the level of inequality as the stakes increase for the winners and losers. The authors conduct an econometric analysis of Brazilian 2002 and 2004 elections that confirms this theoretical

Introduction

13

expectation, especially for the municipal elections. Moreover, according to the empirical results, the higher the age dispersion and the variation in educational achievement among voters, the more expensive the electoral campaigns are. This suggests that electoral financing needs to be very well regulated in Latin America. In chapter 8, Fernando Filgueira, Luis Reygadas, Juan Pablo Luna, and Pablo Alegre examine political representation. They argue that Latin America has been facing a second crisis of incorporation and has recently been experiencing its first political offspring—the “shift to the left.” The first incorporation crisis (a term coined by political sociologists in the 1940s and 1950s) referred to the emergence of populist leaders, movements, and parties in the postwar period under the import-substitution model in relatively closed economies. What has given birth to the current incorporation crisis is the combination of uninterrupted electoral democracies and the shortcomings (and achievements) of the Washington Consensus era of liberalization and globalization of production, trade, and finance. The recent commodity booms that have sustained and fed the shift to the left in the region (or rather, shifts, given the variety of types of leftist governments) are external and economic. In this chapter, Filgueira and colleagues evaluate both the political conditions and policy initiatives that are present in countries with recent shifts to the left. In doing so, they incorporate inequality and social exclusion, in the context of democratic politics, as long-term keys to understanding this emergent phenomenon. In chapter 9, Merike Blofield and Liesl Haas examine whether and how unequal access to resources and class divisions influence agenda setting and the policy process in a specific policy area: gender equality, or women’s rights, policies. This policy area is a good case study, given that it directly affects 50 of the population and indirectly virtually everyone. Gender equality policies do not automatically imply economic redistribution; rather, redistribution depends on the type of issue, and hence there is variation on this front. Gender equality has also been identified as critical to democratic consolidation and the quality of democracy, as well as to economic and social development. The authors analyze reform or lack thereof of three policy areas—domestic violence, domestic workers’ rights, and abortion—across the region. They examine how the independent variables posited by the literature (feminist movements, women’s policy machineries, percentage of women in the legislature, party ideology, the international context, and the extent of orga nized opposition) are filtered through and influenced by socioeconomic inequalities and class divisions and condition both agenda setting and policy outcomes in these gender equality policies.

14

the great gap

Part 4: Taxation and Social Policies

Part 4 examines the relationship between inequalities and public policies focused on redistribution. State policies are, to an extent, path dependent, and this characteristic constrains current policy choices (Pierson 2001). This part focuses on two central sets of redistributive policies: tax policies and social policies (Weyland 1996). The former addresses revenue; the latter, expenditure. Taxation is the cornerstone of a modern welfare state. Aside from providing for certain public goods, taxation and consequent public expenditures enable states to pool risks among citizens, to redistribute income, and to equalize opportunities. In chapter 10, James E. Mahon Jr. investigates the connections between income distribution and fiscal policy in Latin America. Historically the tax systems in Latin America have tended to rely less on progressive income and wealth taxes and more on trade taxes and regressive value-added or consumption taxes in comparison with advanced industrialized countries (De Ferranti et al. 2003; Goñi et al. 2008). Mahon argues that from a global perspective, tax reforms in the 1980s and 1990s, far from moderating this pattern, in fact accentuated two Latin American anomalies, severe inequality and a reliance on indirect (consumption) taxes. In particular, personal income taxes (those with the greatest redistributive potential) have declined as a proportion of GDP, and the overall tax burden in Latin America is much lower than in other regions of comparable per capita income. These reforms were driven mainly by circumstantial factors—the pressing need for revenue, intellectual currents, and the role of the International Monetary Fund—as well as by the unrealistic hope that spending could easily be reoriented toward effective redistribution. However, he argues that the region’s great inequality conditioned this choice in a fundamental way: when a country’s investment capital is held by very few, it is reasonable to fear destructive capital flight in response to taxes on property or income. Mahon concludes with comments on fiscal covenants and political incorporation and suggests that along with the informal sector, in many Latin American countries it is the bourgeoisie that needs to be (re)incorporated into a national project. On the expenditure side, social policies tend not to be well targeted in the region and frequently contribute to deepening inequality. Often regressive social security systems privilege those in the formal sector and those in the higher-income groups. Such systems are also politically more difficult to reform given vested, highly organized interests (De Ferranti et al. 2003; Huber, Pribble, and Stephens 2008; Lindert et al. 2006). In chapter 11, Juliana Martínez Franzoni and Koen Voorend analyze how social policies ameliorate or reinforce inequalities, and how they influence the available policy options.

Introduction

15

Drawing from a typology Martínez Franzoni (2008) has elaborated for eighteen Latin American countries, they distinguish between countries with what they term state welfare regimes—whether productivist, as in Chile, or protectionist, as in Costa Rica—and familialistic welfare regimes, as in El Salvador. Analyzing the aforementioned representative cases, they first establish the specific effects current social policies have on income distribution—that is, on reversing or maintaining primary distribution. Second, they relate these effects to actual policies under way and discuss how different welfare regimes foster distinct distributional coalitions to accomplish redistribution. They find that what is effective in reducing poverty today may not contribute to the political mobilization necessary for further redistribution. The conclusion builds on the findings of the chapters and discusses, first, the political effects of socioeconomic inequalities, and second, the factors that influence redistributive politics. I conclude by discussing political opportunities for redistribution in the region, as well as an agenda for further research on inequality and democratic politics. We now turn in part 1 to a discussion of the socioeconomic foundations of the political constraints and opportunities faced by Latin American states.

Notes 1. They fi nd that most of the decline can be attributed to a decline in labor income inequality (linked to increases in the coverage of basic education) and an increase in cash-transfer programs. See López-Calva and Lustig (2010). 2. Th is is also documented by López-Calva and Lustig (2010, 3–4), drawing on data from the Socio-Economic Database for Latin America and the Ca ribbean. 3. The data in figures I.1 to I.3 vary by source, given that income distribution can be calculated in different ways. The key is to maintain comparability across space and time in a given figure. For instance, CEPAL/ECLAC figures for share of top decile are lower than the figures given in the Human Development Report (HDR) because of differences in how income is calculated. I use the HDR in figure I.3 in order to ensure consistency and comparability between countries across regions. In CEPAL/ECLAC data (which include only Latin American and Ca ribbean countries), the figures range from Uruguay and Costa Rica, where the top decile receives 27.8 and 28.7 of income, respectively, to Brazil, where the top decile receives 44.6 of income, with Chile at 40, Colombia at 41, and Bolivia at 41 (CEPAL 2006, 85–87).

References Bachrach, Peter, and Morton S. Baratz. 1970. Power and Poverty: Theory and Practice. New York: Oxford University Press. Bellone Hite, Amy, and Jocelyn S. Viterna. 2005. “Gendering Class in Latin America: How Women Effect and Experience Change in the Class Structure.” Latin American Research Review 40 (2): 50–82. Benhabib, Jess, and Adam Przeworski. 2006. “The Political Economy of Redistribution Under Democracy.” Economic Theory 29:271–90.

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Bermeo, Nancy. 2009. “Does Electoral Democracy Boost Economic Equality?” Journal of Democracy 20 (4): 21–35. Boix, Carles. 2003. Democracy and Redistribution. Cambridge: Cambridge University Press. Brinks, Daniel M. 2008. The Judicial Response to Police Killings in Latin America: Inequality and the Rule of Law. Cambridge: Cambridge University Press. Centeno, Miguel Angel, and Alejandro Portes. 2006. “The Informal Economy in the Shadow of the State.” In Out of the Shadows: Political Action and the Informal Economy in Latin America, edited by Patricia Fernández-Kelly and Jon Shefner, 23–48. University Park: Pennsylvania State University Press. CEPAL. 2006. Anuario estadístico de América Latina y el Caribe. Santiago, Chile: United Nations/CEPAL. ———. 2009. Panorama social de América Latina. Santiago, Chile: United Nations/ CEPAL. Chalmers, Douglas A., Carlos M. Vilas, Katherine Hite, Scott B. Martin, Kerianne Piester, and Monique Segarra, eds. 1997. The New Politics of Inequality in Latin America: Rethinking Participation and Representation. New York: Oxford University Press. De Ferranti, David, Guillermo E. Perry, Francisco H. G. Ferreira, and Michael Walton. 2003. Inequality in Latin America and the Caribbean: Breaking with History? Washington, D.C.: World Bank. De Swaan, Abram. 1988. In Care of the State: Health Care, Education, and Welfare in Europe and the USA in the Modern Era. London: Polity Press. Echeverri-Gent, John. 2009. “New Approaches to the Politics of Inequality in Developing Countries.” PS: Political Science and Politics 42 (4): 629–31. ECLAC. 2000. The Equity Gap: A Second Assessment. Santiago, Chile: United Nations/ ECLAC. ———. 2007. Social Panorama of Latin America. Santiago, Chile: United Nations/ ECLAC. Ferreira, Francisco H. G., and Martin Ravallion. 2008. “Global Poverty and Inequality: A Review of the Evidence.” Policy Research Working Paper 4623, World Bank, Washington, D.C. Gavíria, Alejandro. 2006. “Movilidad social y preferencias por redistribución en América Latina.” Documento CEDE 2006-03, Universidad de los Andes, Bogotá, Colombia. Goñi, Edwin, J. Humberto López, and Luis Servén. 2008. “Fiscal Redistribution and Income Inequality in Latin America.” Policy Research Working Paper 4487, World Bank Development Research Group, Washington, D.C. Gottschalk, Ricardo, and Patricia Justino, eds. 2006. Overcoming Inequality in Latin America: Issues and Challenges for the Twenty-first Century. London: Routledge. Huber, Evelyne. 2009. “Politics and Inequality in Latin America.” PS: Political Science and Politics 42 (4): 651–55. Huber, Evelyne, Jennifer Pribble, and John D. Stephens. 2008. “The Politics of Effective and Sustainable Redistribution.” In Stuck in the Middle: Is Fiscal Policy Failing the Middle Class? edited by Antonio Estache and Danny Leipziger, 155–88. Washington, D.C.: Brookings Institution Press. Karl, Terry Lynn. 2000. “Economic Inequality and Democratic Instability.” Journal of Democracy 11 (1): 149–56. Kaufman, Robert R. 2009. “Inequality and Redistribution: Some Continuing Puzzles.” PS: Political Science and Politics 42 (4): 657–60.

Introduction

17

Korzeniewicz, Roberto Patricio, and William C. Smith. 2000. “Poverty, Inequality, and Growth in Latin America: Searching for the High Road to Globalization.” Latin American Research Review 35 (3): 7–54. Kurtz, Marcus J. 2004. “The Dilemmas of Democracy in the Open Economy: Lessons from Latin America.” World Politics 56 (2): 262–302. Lindert, K., E. Skoufias, and J. Shapiro. 2006. Redistributing Income to the Poor and the Rich. Washington, D.C.: World Bank. López-Calva, Luis F., and Nora Lustig, eds. 2010. Declining Inequality in Latin America: A Decade of Progress? Washington, D.C.: Brookings Institution Press. Márquez, Gustavo, Alberto Chong, Anne Duryea, Jacqueline Mazza, and Hugo Ñopo, eds. 2008. Outsiders? The Changing Patterns of Exclusion in Latin America and the Caribbean. Washington, D.C.: Inter-American Development Bank. Martínez Franzoni, Juliana. 2008. “Welfare Regimes in Latin America: Capturing Constellations of Markets, Families and Policies.” Latin American Politics and Society 50 (2): 67–100. Meltzer, Allan H., and Scott F. Richard. 1981. “A Rational Theory of the Size of Government.” Journal of Political Economy 89 (5): 914–27. O’Donnell, Guillermo. 1998. “Poverty and Inequality in Latin America: Some Reflections.” In Poverty and Inequality in Latin America: Issues and New Challenges, edited by Victor E. Tokman and Guillermo O’Donnell, 49–71. Notre Dame: University of Notre Dame Press. ———. 2004. “Human Development, Human Rights, and Democracy.” In The Quality of Democracy: Theory and Applications, edited by Guillermo O’Donnell, Jorge Vargas Cullell, and Osvaldo M. Iazzetta, 9–92. Notre Dame: University of Notre Dame Press. Pierson, Paul, ed. 2001. The New Politics of the Welfare State. New York: Oxford University Press. Portes, Alejandro, and Kelly Hoff man. 2003. “Latin American Class Structures: Their Composition and Change During the Neoliberal Era.” Latin American Research Review 38 (1): 41–82. Przeworski, Adam, and Covadonga Meseguer. 2005. “Globalization and Democracy.” In Globalization and Egalitarian Distribution, edited by Pranab Bardhan, Samuel Bowles, and Michael Wallerstein, 169–91. Princeton: Princeton University Press. Roberts, Kenneth M. 2002. “Social Inequalities Without Class Cleavages in Latin America’s Neoliberal Era.” Studies in Comparative International Development 36 (4): 3–33. Robinson, James A. 2010. “The Political Economy of Redistributive Policies.” In Declining Inequality in Latin America: A Decade of Progress? edited by Luis F. López-Calva and Nora Lustig, 39–71. Washington, D.C.: Brookings Institution Press. Sen, Amartya, ed. 1984. Resources, Values, and Development. Oxford: Blackwell. ———. 1992. Inequality Reexamined. Cambridge: Harvard University Press. Tokman, Victor E., and Guillermo O’Donnell, eds. 1998. Poverty and Inequality in Latin America: Issues and New Challenges. Notre Dame: University of Notre Dame Press. UNDP. 1995. Report of the World Summit for Social Development. Copenhagen: UNDP. http://www.un.org/documents/ga/conf166/aconf166-9.htm. ———. 2004. Report on Democracy in Latin America: Towards a Citizens’ Democracy. New York: UNDP. Vilas, Carlos M. 1997. “Participation, Inequality, and the Whereabouts of Democracy.” In The New Politics of Inequality in Latin America: Rethinking Participation and

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Representation, edited by Douglas A. Chalmers, Carlos M. Vilas, Katherine Hite, Scott B. Martin, Kerianne Piester, and Monique Segarra,3–42. New York: Oxford University Press. Weyland, Kurt Gerhard. 1996. Democracy Without Equity: Failures of Reform in Brazil. Pittsburgh: Pittsburgh University Press. ———. 2004. “Neoliberalism and Democracy in Latin America: A Mixed Record.” Latin American Politics and Society 46 (1): 135–57.

1

Fault Lines in Latin American Social Development and Welfare Regime Challenges Fernando Filgueira

Introduction Is there such a thing as a Latin American route to development? It is widely believed that the heterogeneity of the region calls for a categorical and negative answer. What do Guatemala and Chile or Uruguay and Peru have in common? For some people, these countries have had much in common but have found themselves in different development stages; for others, they have represented different models of development. The debate over the heterogeneity of Latin American development has always been based on distinctions related to level and type: Peru shows a higher rate of development than Honduras but a lower rate than Argentina; or Peru represents development in the Pacific region, and Honduras represents Central American development, whereas Argentina is closer to the model of the traditional white settler colonies. In any case, in distinctions both of level and of type, the academy has been inclined to emphasize the variance within Latin America. This attitude, however, is tinged with a bit of schizophrenia. Although few scholars in the region would agree to refer to Latin America as a homogeneous zone, many of them are inclined to use the denominative term without specifying variance, particularly when they refer to the region’s history and current events. This means that the import-substitution model, the debt crisis, the lost decade, and the new exporting model are all stages of Latin America. Likewise, the oligarchic regimes, the populist stages, the democracies, and their collapses and reestablishment are also political stages of Latin America. It is evident that the academy will soon point out that not all the countries faced these processes in the same way, nor had the exact same connotations in each of them. In brief, internal variance is a concern once again. The problem with this debate

22

the socioeconomic context

is that it is irrelevant, or, strictly speaking, it cannot be answered from Latin America’s perspective. In order to answer the question whether Latin America has common elements that distinguish it from other developing regions, it is necessary to perform an empirical comparative analysis of this region and all others. The real problem in this analysis is that variance in levels of development is extremely high in the region. Therefore, when we try to categorize Latin America by comparing it with other regions, evidence suggests that there is not a common pattern in Latin America. In fact, if we performed an analysis of clusters with variables related to GDP, infant mortality, and life expectancy at birth for the set of countries in the world, Latin America would not appear as a self-contained unit. Instead, its more developed countries would join developed Asia and Eastern Europe, whereas those countries showing intermediate development would join the poorest countries in the former Soviet republics. Strictly speaking, however, these clusters are created by differences in the level rather than the type of development. The analytic strategy for dealing with this issue of commonality requires a two-stage approach. First, we should determine the different strata of economic and human development in Latin America and in the rest of the world. We should then try to determine whether we can identify Latin America as a substantive region within these layers, rather than a region in the geographical sense. In an effort to do so, this chapter includes a primary analysis of the levels of development, and within this analysis, of development types or profiles.

Regional Features from a Comparative Perspective, Types of Social States, and the Discrepancy Between Risk and Protection in the Past Latin America shows a wide range of development, extending from countries with high levels of human development to those with lower-middle development. A simple comparison of the means of human development (table 1.1) allows us to observe quickly how each Latin American subgroup is related to other countries in the globe in terms of achievements. However, even though subgroups of countries in Latin America exhibit similar levels of development as other subgroups of countries in other developing regions, they differ in that they display a specific type of development at all levels, an arrangement that differentiates them from other countries and regions. This macroconstellation is made up of three major sociostructural dimensions that separate Latin America’s route to development from the paths of other regions: the levels of inequality, the coexistence of demographic

Fault Lines in Latin American Social Development

23

Table 1.1 Countries and their levels of human development at the beginning of the millennium Mean Upper-middle- and high-income group: high HDI Asian tigers (Korea, Singapore, Hong Kong, Taiwan) Eastern Europe: UM income and high HDI Latin America: UM income and high HDI Middle- and upper-middle-income group: middle and upper-middle HDI Arabian Peninsula Latin America: UM income and UM HDI Eastern Europe: Middle income and UM HDI Emerging Asian tigers (Malaysia, Thailand, Philippines, China) Lower-middle-income group: lower-middle HDI Latin America: LM income and LM HDI Eastern Europe: LM income and LM HDI Other Southeast Asian (Indonesia, Vietnam) North Africa

. . . . . . . . . . .

Source: Prepared by the author with data supplied by the UNDP (2004a). The estimates of the 2004 human development figures issued by the UNDP are from data for 2002.

transitions in child and old-age dependency, and the level of urbanization. These dimensions are key variables in understanding the area and the fundamental vectors of human development from a sociological point of view, as well as in more accurately identifying the weaknesses, opportunities, and types of transformation that will be required in the social states if robust sustainable development is wanted. The database created was used to perform a cluster analysis that takes into account the following variables: child and old-age dependency ratios, fertility rates, urbanization, relation between the national income proportions of the wealthiest and poorest deciles within the population, and mortality of children under the age of 5. With a few exceptions, Latin American countries are grouped together and differ from countries in other regions at each level of development. Countries with High Levels of Human Development

If I leave aside Western Europe and the Anglo-Saxon countries and use available data for analysis, the set of countries with high human development includes fi fteen countries (see table 1.2). Among these countries, an important part belongs to Eastern Europe, another belongs to what is known as Southeast Asia, and finally, a set of four countries is in Latin America. In the case of countries with high human development, the hypothesis of a  Latin American–specific developmental pattern put forth is somewhat verified.

24

the socioeconomic context

Table 1.2

Conglomerates of countries with high human development

Case Slovenia Korea, Republic of Costa Rica Czech Republic Estonia Poland Hungary Lithuania Slovakia Croatia Latvia Argentina Chile Uruguay Singapore

 clusters

 clusters

 clusters

              

              

              

Source: Prepared by the author and supported by the database created from consolidated data from the UNDP (2004a), and World Bank (2004), hereafter “consolidated global database.”

When I defi ne a cluster model that admits up to two types of countries, Latin America’s high human developers, with the exception of Costa Rica, form a clear cluster, joined by Singapore. However, when I permit three or more clusters, although Argentina and Chile remain together, Uruguay forms a new cluster with Singapore. There is no doubt that the countries in Latin America, again with the exception of Costa Rica, clearly differ from their human development counterparts in Eastern Europe. We can observe the proximities and distances more graphically in figure 1.1. Argentina and Chile are very close to one another, mostly because of their figures for inequality, infant mortality, and dependency ratios related to children and people over the age of 65. Uruguay shows a lower degree of inequality, a slightly lower child dependency ratio, and a higher old-age dependency ratio. These figures, particularly the lower child dependency ratio and degree of inequality, bring it closer to Singapore. In turn, Costa Rica is clearly separate from the Latin American cluster because of its low relative inequality, its lower degree of urbanization, and its dependency and fertility rates that place this nation among those that seem to extend their demographic windows of opportunities more considerably (to some degree, Chile also shows a better pattern in this respect, although it is still far from the European countries or the Asian tigers). Apart from the evidence from the cluster analysis, Latin American means in the working-population and child dependency ratios are always notably worse in the high human developers than those of their Asian and Eastern European counterparts (see table 1.3). Old-age dependency ratios are certainly better than in Eastern Eu rope, but we should note the difference in child

Fault Lines in Latin American Social Development

25

fig. 1.1 Clusters of countries with high human development. Source: Prepared by the author from data in the consolidated global database.

Table 1.3 Countries with high human development: Averages of selected variables by subregions

Region Asian tigers Latin America Eastern Europe Total

Net enrollment rate in primary education, – (%)

Working population,  (%)

Child dependency ratio, 

Dependency ratio of adults over the age of , 

. . . .

. . . .

. . . .

. . . .

Source: Prepared by the author from data in the consolidated global database.

dependency ratios: the combined effect of both of the dependency ratios places Latin America as the region with the highest general dependency burden. On the other hand, in terms of fertility—which partially accounts for the previous findings regarding relatively high child dependency—this segment of Latin America shows notably higher ratios than those of its two HDI counterparts from other regions. Its infant mortality rate is also considerably higher than in the rest of the world in this HDI level, and its inequality level, in the best scenarios and with this relative measure, not only doubles that of the Asian tigers but is more than triple that of the Eastern European countries (see table 1.4).

26

the socioeconomic context

Table 1.4 Averages of selected variables by subregions in countries with high human development

Region Asian tigers Latin America Eastern Europe Total

Total fertility rate, –

Mortality rate in children between  and  years old, 

% wealthiest/ % poorest

Urban population,  (%)

. . . .

. . . .

. . . .

. . . .

Source: Prepared by the author from data in the consolidated global database.

In short, among the countries with high human development, Latin America shows the worst combined ratio of dependency, high comparative fertility (even when fertility is in these countries close to replacement-rate level), extremely high levels of inequality, and levels of urbanization that, although they are lower than those of the Asian tigers, are still considerably higher than those of Eastern Europe. The connection between inequality and demographic factors has been thoroughly studied in the past, but some of the lessons have not been taken into account in recent developmental discourses. In very simple terms, the higher the inequality, the higher the resistance of the poorest sectors to adopting the fecundity patterns of middle and high sectors. This prevents the convergence of fecundity rates between poor and not-poor sectors. On the other hand, infant mortality, the key indicator of life expectancy at the moment of birth, tends to decrease and converge. Therefore, although societies advance in their demographic transition, they are inclined to age and will not stop doing so because of high levels of inequality. Finally, life expectancies, both at birth and throughout maturation, of early urbanized societies will increase faster than in developing societies with a more rural bias in their pattern of population settlement. This is why urbanized and exceedingly unequal societies run the risk of having higher combined dependency ratios (both child and old-age dependency) than societies with a similar level of development but a lower degree of inequality. The data basically confirm this intuition. Although the causal mechanisms will certainly be more complex and external variables tied to the development modes of the subregions will surely contribute to these profiles, figure 1.2 clearly exhibits the idiosyncrasy of certain countries in Latin America, which show reduced demographic windows of opportunities or a short demographic bonus, combined with high general inequality. On the other hand, it is worth mentioning that these countries in particular show a social state that I have previously defined as a stratified universalist

Fault Lines in Latin American Social Development

27

.65 Uruguay Argentina

Dependency rate (%), 2002

.60 Costa Rica

Chile

.55

Croatia

.50

Lithuania Latvia

Estonia

Hungary .45

Poland Slovakia Slovenia Czech Republic Korea, Republic of

.40

Singapore

Hong Kong, China (SAR) .35 .00

10.00 20.00 30.00 Ratio of national income appropriation of wealthiest 10% to poorest 10%

40.00

fig. 1.2 Inequality and dependency rates in countries with high human development. Source: Prepared by the author from data in the consolidated global database.

state (Filgueira 1998). What I was referring to was that around the 1970s, the majority of the population in these countries was covered by health, education, and social security protection systems. But except for education, this protection was usually clearly stratified, and the more powerful political and economic sectors had access to the fi rst, best, and most varied benefits. Th is model reflected the model of continental Eu rope with a conservativecorporatist tradition: stratified, based on formal employment, directed (in social security) toward the head of the household and then to his family and future, and granting privileges to government employees. Because of the evolution of the structure of risk in these countries during the past few decades, this welfare framework has begun to collapse for several reasons. These are the countries that, in relative terms, have been more affected by the deterioration and informality of employment conditions, along with the increase in unemployment, by virtue of the simple fact that these were the nations that had, especially in their major cities, labor markets that were more formalized and closer to full employment. Furthermore, these are also the first countries to begin their second demographic transition by increasing

28

the socioeconomic context

the participation of women in the labor market, the expansion of divorce rates, and the appearance of new types of families, particularly civil marriages and single-parent households. Uruguay and Argentina are the best examples of the apex and collapse of the stratified corporate model, of modern urbanization, and of the stable two-parent nuclear family, and this collapse explains the greater imbalance between their current structures of risk and their previous welfare frameworks. The high relative levels of social spending per capita have permitted the concealment of the true deficiency of these countries’ current protection systems, especially in Argentina and Uruguay. Costa Rica and Chile show some of these problems, but to a lesser extent. Part of this difference is explained by the adjustments that Costa Rica and Chile made to their social protection framework through different strategies: a liberal approach in Chile and an approach with shades of social democracy in Costa Rica. With regard to the tensions caused by the transformations in the labor market, the gender-based division of labor, and divisions in families within these societies, the liberal and the social democratic approaches offer solutions that streamline an escape from the expensive and ineffective fragmentation trap of the corporate universalism and stratified models. But before I conclude the analysis of high human development cases, it is worth repeating that the urbanized, unequal, mobilized societies, which used to have an important level of social protection, find themselves threatened by the new development pressures and their association with the historical legacies of the old model’s development. Countries with Medium Human Development

The nations defined as countries with medium human development comprise a wide set of countries from different parts of the globe (twenty-eight countries in all), including parts of Southeast Asia, parts of the former Soviet republics or countries of the socialist bloc, and countries within Latin America and the Caribbean. The analysis of clusters (see table 1.5) fully confirms the hypothesis of a Latin American configuration of development. From the countries within Latin America, Brazil, Mexico, Panama, Venezuela, Colombia, Peru, and Paraguay are included. Only when we adopt the possibility of accepting up to four country categories does Latin America cease to be a substantively defined bloc, because Brazil is left without counterparts among the countries considered. But when we look at three country categories, Latin America is grouped and is clearly different from its human development counterparts in other regions, not only from Southeast Asia and the Soviet-bloc countries but also from the English-speaking Caribbean countries. When we look at figure 1.3, the proximity between the region’s countries is even more evident, and we see how the first iterations begin to be grouped

Fault Lines in Latin American Social Development

29

Table 1.5 Conglomerates of countries with medium human development Case Kazakhstan Turkmenistan Azerbaijan Trinidad and Tobago Bulgaria Russian Federation Malaysia Macedonia Belarus Albania Bosnia and Herzegovina Romania Ukraine Saint Lucia Thailand Jamaica Armenia Philippines Jordan China Georgia Brazil Mexico Panama Venezuela Colombia Peru Paraguay

 Clusters

 Clusters

 Clusters

                           

                           

                           

Source: Prepared by the author from data in the consolidated global database.

together and are combined with the other countries only in the third, fourth, or fift h iterations, forcing the model to consider fewer clusters. Again, the underlying reasons behind Latin America’s peculiar profile are the high degree of inequality and the high child demographic burden, combined with a relatively high demographic burden on the elderly, as compared with the other subregions (see table 1.6). Specifically, this Latin American subregion shows the highest combined dependency ratio of all regions. In the case of countries with medium human development, the Arabian Peninsula shows the highest levels of fecundity, which is key to its high child dependency ratio (see table 1.7). However, although fecundity levels in this segment of Latin America are below those of the Arabic countries, they are clearly above the replacement rates. In turn, infant mortality presents intermediate figures in comparison with this subregion’s human development counterparts, and even though urbanization levels are high and clearly above

fig. 1.3 Clusters of countries with medium human development. Source: Prepared by the author from data in the consolidated global database. Table 1.6 Countries with medium human development: Averages of selected variables by subregions

Region Arabian Peninsula Southeast Asia Latin America—UM income and UM HDI Eastern Europe— middle income and UM HDI Total

Net enrollment rate in primary education, – (%)

Working population,  (%)

Child dependency ratio, 

Dependency ratio of adults over the age of , 

. . .

. . .

. . .

. . .

.

.

.

.

.

.

.

.

Source: Prepared by the author from data in the consolidated global database.

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31

Table 1.7 Averages of selected variables by subregions in countries with medium human development

Region Arabian Peninsula Southeast Asia Latin America— UM income and UM HDI Eastern Europe— middle income and UM HDI Total

Total fertility rate, –

Mortality rate in children between  and  years old, 

% wealthiest/ % poorest

Urban population,  (%)

. . .

. . .

. . .

. . .

.

.

.

.

.

.

.

.

Source: Prepared by the author from data in the consolidated global database.

those in Eastern Europe and Southeast Asia, they are markedly lower than those for the Arabian Peninsula. Again, inequality is a substantial hallmark because it doubles the average for this HDI subgroup, which is clearly detached from the other subregions. In fact, inequality within this Latin American group not only is higher than in all of its human development counterparts, but it is also the highest of all Latin American subregions. This is no coincidence. Except for Paraguay, the countries that make up this cluster are those that I have previously defined as dual regimes of social protection (Filgueira 1998). Approximately half the population was covered by modern social protection systems, whereas the other half had no access to them. This was due to the fact that the European continental matrix of those systems was combined with labor markets considerably less capable of creating formal employment, especially in health and social security. Countries with Lower-Middle Human Development

Of the eighteen countries with lower-middle human development, seven are from Latin America. From the same variables, the cluster analysis confirms the hypothesis of the peculiarity of Latin American development (see table 1.8). In this case, two countries seem to be clearly detached from the Latin American cluster: Bolivia, which is related only to Mongolia, and the Dominican Republic, with a development profile more like that of countries in North Africa and, in some cases, South Asia. The results of figure 1.4 allow us to confirm the unmistakable cluster formed by Honduras, Guatemala, El Salvador, Nicaragua, and Ecuador, as well as the relative distances of Bolivia and the Dominican Republic from the Latin American cluster.

32

the socioeconomic context

Table 1.8 Conglomerates of countries with lower-middle human development Case Uzbekistan Kyrgyzstan Tajikistan Ecuador El Salvador Honduras Nicaragua Guatemala Dominican Republic Tunisia Algeria Egypt Morocco Indonesia Vietnam Mongolia Bolivia Moldova, Republic of

 Clusters

 Clusters

 Clusters

                 

                 

                 

Source: Prepared by the author from data in the consolidated global database.

fig. 1.4 Clusters of countries with medium-low human development. Source: Prepared by the author from data in the consolidated global database.

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33

Table 1.9 Countries with lower-middle human development: Averages of selected variables by subregions

Region North Africa Southern Asia Latin America Eastern Europe Total

Net enrollment rate in primary education, – (%)

Working population,  (%)

Child dependency ratio, 

Dependency ratio of adults over the age of , 

. . . . .

. . . . .

. . . . .

. . . . .

Source: Prepared by the author from data in the consolidated global database.

Table 1.10 Averages of selected variables by subregions in countries with lower-middle human development

Region North Africa Southern Asia Latin America Eastern Europe Total

Total fertility rate, –

Mortality rate in children between  and  years old, 

% wealthiest/ % poorest

Urban population,  (%)

. . . . .

. . . . .

. . . . .

. . . . .

Source: Prepared by the author from data in the consolidated global database.

Again, child dependency ratios in the Latin American cluster differ from those of the others, although the old-age dependency ratios are lower than those of their counterparts (see table 1.9). Once more, the levels of educational enrollment do not seem to indicate the most important differences, and the rate of the working population turns out to be the lowest. As seen in table 1.10, the pattern of inequality markedly distinguishes Latin America from the other subregions with similar levels of human development, and levels of urbanization are also higher than the general pattern. These countries, which were already characterized as exclusive in the past (Filgueira 1998), have incorporated part of the minimalist agenda of social policies that has penetrated the region in recent years, one of which is “propoor” (Sojo 2003). In view of their exclusive social protection systems, this development is positive. Nevertheless, it does not seem to be directed toward the creation of universal systems, but rather toward focused policies that are extremely limited at times (Sojo 2003). This implies the waste of a tremendous opportunity, that is, not taking advantage of the demographic window of opportunities that, even when reduced in comparison with its HDI counterparts,

34

the socioeconomic context

grants almost thirty years of decreasing combined dependency ratios. This demographic bonus implies growth in the working-population rate because there will be a decrease in infancy rates and not yet a major old-age contingent. Whether through systems of subsidies to the contributory systems or through the creation of noncontributory pillars, the use of the demographic bonus will be higher if the need to strengthen joint fi nancing and risk-diversification instruments is clear from the very beginning. In these countries, social risk is basically derived from exclusion from modern labor markets, basic social protection systems, and access to essential public property. The social state can do quite a bit to make progress on the last two issues, not through limited and focused models, but through universal welfare frameworks. This universal pursuit must lead the process of increasing the state’s fiscal capacities and must not expect the opposite—improving them in order to fi nance the social state. The Brazilian model, with all its flaws, can be used as an example. Through legislation, this country has shown the highest tax-burden increase in the last fifteen years, an unexpected decrease in its enormous levels of inequality, and substantial growth in innovative social programs and politics, which are quite intriguing (CEPAL 2005).

Risk Structure and Welfare Framework The high inequality, the urbanization with poverty, and the short window of demographic opportunity are the result of long-established historical features of the Latin American development models and are also related to and deepened by the transformations that occurred mainly between the late 1980s and the beginning of the twenty-fi rst century. The increase in inequality arose from several sources. These include the labor market; changes in family structure and arrangements, notably the new gender and social division of paid and unpaid work; the intergenerational challenge, evidenced in the changing ratios of child and old-age dependency; changes in the structures of opportunities for workers in these different generations; and changes in urban sociospatial segregation and segmentation. Indeed, these transformations have produced even more stress on the historically fallible concordance between the social structure of risk in the region and its social protection framework. All these factors present a threat to any comprehensive transformation project, either because of the technical difficulties of shaping these policies or because of obstacles to obtaining the basis for political support. In turn, there are three institutional transformations of the social state that interact with these sociostructural transformations and affect the progressive and regressive nature of social spending in Latin America. These three transformations affect the state’s capacity to face the old and ill-treated

Fault Lines in Latin American Social Development

35

structures of risk, as well as the new vulnerabilities that resulted from the recent processes: the composition and sectoral evolution of the social protection systems, the coverage of and eligibility criteria for gaining access to the social protection systems, and the degree of collectivization or privatization reflected in ser vice providers and in the payment or degree of subsidy of these systems. Although these social and institutional transformations have differed throughout the region, there are some common patterns that I will examine. In my review, I will try to establish the most pertinent heterogeneities for country subgroups. The Labor Market and the Structure of Rights of the Systems Ensuring Income Stability: Inequality and Exclusion Divergence Between Risks and Reforms: Example of Misdirected Ideas

The reality of employment conditions implies serious problems for wellbeing, cohesion, and social integration, particularly for those categories that have been defined as the “most affected categories”: low-skilled sectors, women, and young people. The people who share all of these traits are almost certainly prone to poverty and will face a high risk of social exclusion. These categories are vulnerable from a static point of view (current well-being, safety, and integration) and are even more vulnerable from a dynamic point of view (future well-being, safety, and integration). The current structure of Latin American social states and the reforms that they have carried out in their three fundamental pillars of education, social security, and health do not always reflect this configuration of emerging risks from the transformed labor market. I will discuss social security here because it provides an accurate example of the reformist limitations of the previous years. In fact, a big part of the collapse of social security coverage was related to the fact that social security was linked to the formal employment market and suffered from the impact of informalization and labor deterioration. However, the development of a set of reforms in many Latin American systems based on a liberal perspective, with individual capitalization models and forms of private administration, has not resolved the problem but rather has worsened it. The data on social security coverage and reforms shown in table 1.11 show this quite eloquently. The reason for this collapse is quite simple. The individual capitalization models, in conjunction with the processes for improving taxpayers’ workhistory documentation, produce a stronger connection between coverage and workers’ formal employment. Also, the parametric reforms that increased the minimum age and years of contribution required for entitlement to retirement rights, either within the market-oriented reformed systems (for example, in

36

the socioeconomic context

Table 1.11 Latin America and the Caribbean: Social security coverage before and after the structural reforms, estimated from the percentage of the working population contributing to social security

Chile Argentina Uruguay Costa Rica Mexico Colombia Bolivia El Salvador Peru

Coverage of previous systems, estimated by actual contributions

Enrollment, taking into account all the pillars after the reform ()

Coverage, taking into account all the pillars after the reform, estimated by actual contributions ()

        

        

        

Source: Based on Mesa-Lago (2004). Chile surpasses 100 because duplication had not been purged from the old and new systems.

Argentina, Uruguay, Chile, and Colombia) and in systems that did not undertake radical reforms (or have only undergone parametric reforms), also worsen these conditions. More than ever before, eligibility depends on people’s capacity to be formally integrated into the contractual system of labor markets. As formal employment becomes less predominant among urban lower-income sectors as a structuring factor of current and future welfare, social security systems in the region may remain relatively unchanged, consolidating themselves in the old formalized Bismarckian model, or they may even undergo a regression to models with even less solidarity and be geared toward pure individual capitalization systems. Structure of Ages and Inequality: Intra- and Intergenerational Contract Sustainability and Equity

One of the key problems several Latin American countries already face or will face in the near future is the burden represented by old age and its effect on the demands for income and ser vices from the Latin American social state. Nevertheless, this problem, which also has been or will be faced, for example, by Western or Eastern European countries and other nations with moderate to advanced demographic transitions, is very complex in Latin America because of the high levels of inequality and the low rates of formal employment. This complexity means that intergenerational contracts, which are always based, at least to some extent, on the intragenerational contract of the working population, will face major impediments to the creation of suitable tools for solidarity.

Fault Lines in Latin American Social Development

37

Just as the distributive structure used in the past (a social security system based on salary and other defined contributions) tied contributions (as a percentage of salary) to benefits, and the current distributive structure (simple or mixed models of individual capitalization) evidently still does so, social security systems generally reflect the distribution of the working sectors’ income. The fact that social security reflects the structure of inequality in the working population is not necessarily a problem, but it is a problem in Latin America because of its high levels of inequal ity. In most Latin American countries, between 40 and 50 of social security spending is distributed in the upper-income quintile (this is seen in all cases for which information is available). In some cases, social security income appropriation amounts to more than 70 in the upper quintile, for example, in Colombia and Guatemala (CEPAL 2005). Inequality in social security does not truly reflect the current inequality in worker income, but the distribution of income in the past, when the nowinactive workers were making their contributions. The same thing will happen in a capitalization model (in fact, it will be more acute): the allocation of social security benefits will reflect the past pattern of inequality deepened by similar returns to different-sized capital. This seemingly trivial detail is fundamental to understanding the future effects of the social security systems in the region and their inability to ensure higher levels of equity and social cohesion. The old intergenerational contract has been besieged by the changes in the relations between active and inactive workers, which threaten the fiscal sustainability of social security systems. However, there is another threat to the intergenerational contract that is represented by a sudden change in labormarket conditions: the higher levels of informal employment, which will affect the contract in the future by virtue of the decreased levels of social protection that current active workers will have to endure in the future. The benefit from social security systems when they were first implemented was that there were plenty of active workers to support fewer inactive workers financially. This connection deteriorated because of demographic changes and labor-market conditions, in which the increase in activity rates is not reflected in the increase of contributing active workers because of informal employment. In Southern Cone countries (Chile, Argentina, and Uruguay) and in some nations with extensive social security systems, such as Costa Rica and Brazil, the problem is even greater because of the high number of inactive workers, combined with the fact that the majority of contributions that the general treasury has to make to support these systems are not allocated to the unprotected population, but to those with privileged protection systems. In fact, in Argentina, 50 of social security spending comes from general revenues; in Uruguay, almost 30; in Brazil and Mexico, the public sector in particular consumes a high proportion of general revenue subsidies. Something similar occurs in privileged sectors of Colombia, Chile (armed forces), and Peru (Filgueira and

38

the socioeconomic context

Rossel 2005). This spending of general revenues goes, to a very small degree, to financing noncontributory pillars and, to a larger degree, to financing contributory pillars that receive insufficient funds from the state’s privileged sectors or the formal private sectors. On the other hand, a large part of members of the urban lower-income sectors will not be entitled to retirement at the end of their work life, not because they have not made contributions, but because they failed to do so in a timely manner or in sufficient amounts. Th rough the intergenerational contract, their payments end up fi nancing benefits for those who will indeed be entitled to retirement benefits in the future. In other words, even though these sectors contribute to the intergenerational contract of the pay-as-you-go systems or otherwise comply with the contract of responsibility for their future in the capitalization systems, these contributions do not meet the criteria for eligibility. They are forced to save and get coverage and are then told that the amount or timeliness of their contributions was not adequate. It is worth stressing that any alternative that intends to rely mainly or exclusively on the formal labor market to provide basic income social protection in Latin America will experience failure in the future just as the Bismarckian model did in the past and just as the individual capitalization model is currently doing. The Latin American mean for the population over the age of 70 protected by pensions and retirement benefits is 40; between the ages of 65 and 69 it is below 35; and between 60 and 65 it is below 30 (CEPAL 2006). There are only five countries where the percentage at the age of 70 is close to or above 80: Argentina, Brazil, Bolivia, Uruguay, and Chile. In Brazil and Bolivia, this is precisely because there are important noncontributory models (which are universal in Bolivia with its planned universal pension scheme, Bonosol, and quasi-universal for the rural population of Brazil). In Uruguay, the quasi-universal coverage is based on two key mechanisms: access to retirement rights through the sworn statements of witnesses, even if the beneficiary does not have a history of contributions (this does not happen any more) and the noncontributory pension to the elderly, to which everyone over the age of 70 without retirement benefits or other economic resources is entitled (in 2000 these pensions represented almost 10 of the total pensions covered by the state). Chile and Argentina’s social security coverage after the marketoriented reforms became lower than that of Brazil and Uruguay. In 2008, Chile passed a reform that increased coverage through solidaristic, noncontributory instruments. Argentina’s backlash was even more radical, reversing the market-oriented reform completely and returning to a pay-as-you-go system (one, though, that will probably face serious financial problems). Although it may seem more complex, it is easier to set up a solid general revenue tax system and bet on fiscal and social citizenship in the long term than to pursue an elusive formality that is anchored to excessive contributions in order to finance systems that are increasingly threatened by the relationship

Fault Lines in Latin American Social Development

39

between the working and nonworking populations. According to Gómez Sabaini (2006), if natural persons’ income taxes assumed a stronger role in the fiscal systems as a privileged instrument to close the fiscal gap, increase in tax revenues would amount to almost 3 of GDP. In turn, creating a universal pension system that guarantees overcoming poverty in old age would take 2.2 of regional GDP; doing so in a targeted way would imply an expenditure of 0.9 of GDP. A basic-income access and maintenance system supported by general revenues can be the basis for requiring formal base-salary contributions in the future. It is necessary to consider a welfare framework with no clear precedents anywhere in the world. With regard to income, the path of universal social protection in Latin America should have a noncontributory basis or be complementary to a solid noncontributory basis where the existing contributory pillars are strengthened and reorganized, or else it simply will not be universal. The arguments against the perspective defended herein are well known and well founded. If the social security system begins to transition to noncontributory pillars, there is concern that they will negatively affect the incentives to contribute to the current system. On the other hand, if the middle and upper sectors are not interested in noncontributory-basis systems, the political economy that supports good-quality pensions will be affected, and therefore, the noncontributing benefits will end up being burlesque parodies of basic forms of social citizenship. In view of these arguments, it is worth mentioning the following: in most countries, contributions to social security, particularly from the lowermiddle and lower sectors, are seen not as an insurance mechanism but as a tax from which a substantial number of contributors will see no benefits in current or future coverage. This is not lack of foresight; it means being realistic about the number and minimum years of contributions that between 30 and 70 of the currently working population can expect to make in their active lives and the lack of rights to unemployment insurance in most of the general social protection systems in Latin American countries. The problem of social security evasion arises from the lack of incentives. Th is is not because of the existence of other noncontributory systems, but rather because there are no current or future benefits linked to current contributions. Furthermore, there is another aspect of the lack of contributions to social security that has little or no connection whatsoever to incentives. The reason that workers and employers evade social security payments—most of the time by mutual agreement—is that economic activity would otherwise be unsustainable because of the high contribution rates. In particular, the most efficient system for creating remunerated employment in Latin America, the microand small enterprises, is in this situation. The payment capacity seen in these sectors requires lower rates for activation.

40

the socioeconomic context

The sectors with high contributing capacity are those that require low levels of manpower and enjoy high productivity. Income and consumption taxes are the fiscal sources of funds from these sectors; while income and consumption taxes can still collect funds from lower-income sectors, they will have less harmful effects on the creation of formal employment. If this is true, then the general revenues from these collection systems are the ones that should finance a substantial part of social security spending. In fact, this is already happening in many countries, but as I previously mentioned, such spending is directed toward the privileged sectors rather than to basic noncontributory modalities and with an overrepresentation of consumption taxes in the funding of the social security deficits as Mahon shows in chapter 10 of this volume. Such consumption taxes are substantially less progressive than income taxes. From the aforementioned facts, it can be said that the social protection frameworks should aim for lower base-salary tax rates, more noncontributory benefits, greater adequacy of the tax systems in terms of the amounts of current contributions, and greater credibility and appeal regarding current and future benefits for the middle and lower sectors. It can also be said that combating the current sources of stratification in the system is essential if we intend to provide it with fiscal feasibility. In view of what has been stated before, the obstacles to well-funded universal systems do not seem to arise from technical or economic unfeasibility, although both spheres may represent great challenges to the development of a strategy such as that put forth here. The greatest impediment seems to be political unfeasibility. This political unfeasibility has two facets: it is not viable to adopt these systems and their tax bases, and it is also not viable, because of the political economy of the political regimes, to maintain the quality of these systems’ benefits. The current democratic hegemony in Latin America should contribute to the possibility of making these alternatives a reality. If there is any truth in the “median-voter” theory, Latin American social security systems should be addressed to the “median voter” and not, as MesaLago points out (2004), to an illusive Latin America in which people earn upper-middle to high incomes and enjoy formal and stable employment (Filgueira and Rossel 2005). The second reason, and one that should make us more optimistic about the political feasibility of these alternatives, is the change, which must be encouraged, in the discourse and the perspectives of multilateral credit agencies, which are now much more inclined to venture on systems that strengthen the first noncontributory-basis pillars. Nonetheless, these agencies tend to be reluctant to consider universal and solidaristic formats and prefer, in general, more limited forms of targeting. Regarding the debate between targeted versus universal systems, Sojo (2003, 139) warns: “Regarding universality and its solidary financing, disdaining this possibility

Fault Lines in Latin American Social Development

41

ad portas or analyzing solidarity exclusively at extremely micro scales hinders the analysis of the historic conditions of our own region that have enabled us to make gradual progress towards said horizon in extremely different countries, such as Brazil, Colombia and Costa Rica.” Therefore, a universalistic social security reform is vital to strengthening Latin American fiscal systems. The current collection problem in national states is not due to the evasion of social security by upper-middle and high sectors: the collection problem stems from the lack of social security contributions by the lower and lower-middle income sectors and from the extremely low income taxes on natural persons (Gómez Sabaini 2006). A relatively simple lesson can be learned from table 1.12. The keys to redistribution among European states are the way in which they collect funds and the way in which they spend them. Collection is progressive because of the strong influence of the income tax on natural persons. Spending is progressive by virtue of the existence of noncontributory systems with widespread (if not universal) coverage and a low stratification of the pillars financed by the state. The provision of public goods, quasi-public goods, and private goods from the state is not at an ideal level a priori. It is not possible to separate the efficiency of the state’s provision of goods and their suitable quantities and qualities from the issue of distribution. In turn, distribution, particularly regarding the extraction of resources, does not have a suitable method and level Table 1.12 Distributive effect of state taxes, contributions, and transfers on household income among European Union countries, circa 2001 Decile Total Benefits Contribution population available Original and public to social groups income income pensions Taxes security           Total Poora

           

           

           

           

           

Distribution of actual Distribution income of original (allocation) income . . . . . . . . . . .

. . . . . . . . . . .

Sources: Based on OECD data and De Armas (2006). Note: The countries analyzed are Austria, Belgium, Denmark, Finland, France, Germany, Greece, Holland, Ireland, Italy, Luxembourg, Portugal, Spain, Sweden, and the United Kingdom. a The population at risk of poverty is considered to be that whose equivalent available income is below 60 of the total population’s mean.

42

the socioeconomic context

a priori; it depends on the economic capacities of the countries, the fiscal extractive capacities of their governments, and the political-distributive coalitions existing at present or in the future. In contrast to the Eu ropean fi nancing and spending framework, the current social security structure of the Latin American social state, in view of current inequalities and how these are reflected in the labor market (for example, unemployment and informality), does not seem to guarantee minimum levels of security and equality. Therefore, reform is necessary. It should be based on the general fiscal system for financing noncontributory systems and/or provide subsidies to enable the poor’s access to contributory systems, as well as the reorga ni zation and moderation of the inequalities in the current contributory systems. In none of these options do the pure capitalization systems or those combined with traditional contributing models seem to be part of the solution. In fact, they are part of the problem. Health Risks: Rectifying the Wrongs Committed in the Past and Facing Future Challenges The Social Bases of the Old and New Vulnerabilities in Health

Just as the demographic transition modifies the age structures and thus the burdens that the social state will have to bear in income and income maintenance, the aging process, in conjunction with other technological processes and progress in sanitation and access to basic goods such as water, health, and immunization, delimits a transition regarding epidemiology and burdens of different types of diseases. We refer to “epidemiological transition” when the population stops suffering and dying from what are essentially infectious or contagious diseases and begins suffering from noncommunicable diseases, and when there is also an increase in mortality due to accidents or other causes. Latin America shows the simultaneous presence of different epidemiological phases that, in terms of health, also reduce the advantages (if any) of going from one epidemiological stage to another. In fact, the region shows an increasing affliction of diseases present at advanced epidemiological stages while still maintaining a significant burden from diseases from previous stages. If we compare Latin America with the wealthiest countries through the indicator that measures the years of healthy life lost to different diseases (table 1.13), we can clearly see the regional distinctions. Again, inequality and its different materializations in urban-rural, formalinformal, and ethnic segmentations are behind this overlapping of transitions. For example, in Brazil, although circulatory-system disorders were already among the leading causes of death and represented 27 of total deaths,

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43

Table 1.13 Disease-burden indicators (in lost years of healthy life per 1,000 inhabitants)

Noncommunicable diseases Communicable and mother-to-child diseases Accidents and external causes

OECD (high-income)

Latin America

  

  

Source: ECLAC (2006).

those deriving from respiratory disorders, strongly influenced by infectious or contagious diseases, still represented 10 of causes of death in 1996 (Tobar 1998). Even in Argentina or Uruguay, cases of pneumonia and the flu around 1995 represented 3 of the total deaths and had a prevalence rate of 20.4 (Tobar 1998). In countries such as Costa Rica, which has one of the most exemplary health systems on the continent, what is known as the pathology of development is identified with an increase in degenerative diseases, combined with afflictions typical of social deterioration processes, while diseases such as malaria, dengue, and cholera are emerging once again. In Chile, respiratory disorders and digestive-system disorders accounted for almost 18 of causes of death in 1996, whereas tumors and circulatory-system disorders already reached nearly 50. If this complex overlapping already is taking place even in the more developed countries’ demographic transition, then something similar is taking place in countries with lower relative development, but with infectious and contagious diseases higher and degenerative diseases lower. In a country such as El Salvador, even if we do not consider external causes, diseases combine typical disorders of advanced societies in their epidemiological stage with diseases typical of early stages. Among the four main causes of death, we can include tumors and circulatory-system disorders combined in almost equal proportions with communicable diseases and disorders in the perinatal period. Mexico is another country that, like Brazil, has to face a relative backlog of underdeveloped-country diseases while those of a more advanced epidemiological and demographic transition stage are already appearing as the main causes of death. This overlapping is in part due to the fact that at the same time that people live, on average, increasingly longer lives, a considerable proportion of the population lives in conditions of poverty and malnutrition, with no access to sanitation systems and drinking water. On the other hand, as we will see below, health-care systems are segmented in quality and access. As a result, part of the population has no access to tertiary health-care levels and also has limited or nonexistent access to medications and primary health-care systems. Although one of the key issues traditionally identified by the literature dedicated to health care in the region has been insufficient development of a suitable supply of basic ser vices and access to goods for the prevention of

44

the socioeconomic context

infectious or contagious diseases, we can now add the deterioration of living conditions in the cities. In particular, this deterioration involves the processes of residential segregation and the sectors that used to be integrated into urban areas being exiled to the city outskirts. This deterioration has implications associated with concentrated epidemiological risk and a lack of access to sanitary systems and drinking water in the cities. However, the increased life expectancy at birth and the decrease in infant mortality show that it is possible to move forward toward “soft” areas of health-care development (soft areas typically include infant mortality when rates are high, basic sanitation, and some vaccination that suppresses some communicable diseases). But this same progress, without more comprehensive access to disease-prevention and health-care systems, is responsible for the new mass of people facing health risks. On the other hand, the increase in life expectancy after the age of 60 occurs in an extremely unequal way within dramatically unequal societies. Therefore, the disease burden of this population and the costs related to high survival rates basically come from the sectors with more income and power, which are overrepresented in old age. Not unlike social security systems, health-care systems must review their intergenerational contracts because of both inter- and intragenerational equity. To put it more categorically: when reaching the age of 80 becomes a relatively equal opportunity for the entire population, the universalization of that age’s care will be redistributive; before that, it will be regressive. If we take into account the desirable and expected increase in life expectancy in the future, the benefits to be universalized must be carefully selected for seniors in order to recognize the new presence of a posttransitional disease burden without turning that disease burden into a fiscal overburden that suppresses funds for the younger population. However, it is not feasible to entrust the market with the adjustment to these additional strains and demands, because it will operate by skimming risks and will leave care for catastrophic diseases of those who cannot pay in the hands of the state. If the goal is to target health care, this should occur in a subset of expensive and difficult-to-access ser vices in old age, not in the ser vices with a progressive distributive effect, because the presence of health risks is universal or even shows higher predominance in the poorest sectors: childhood, maternity, and occupational diseases during active life. In simple terms, we can affirm that a lower rate of inequality, higher public social spending, and a larger degree of allocation of social spending to health care would favor a more equitable structure of health risk distribution and health-care coverage. A simple review of some analyses related to life expectancy and mortality in Latin American countries illustrates this point.

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As we can see in figure 1.5, there is a strong association between life expectancy at birth and infant mortality in children under age 5 and between the expectancy of not surviving to the age of 40 and life expectancy at birth. This is in fact a statistical product, because in both cases the first measurement is strongly dependent on the second one. But it is worth noting here that in Bolivia, for example, an average life of 62 years is compatible with 80 deaths for every 1,000 children between 0 and 5 years old. This means, in plain English, that although a high percentage of people reaches the age of 80 (there is no other way to reach that mean when almost one out of every ten children born alive dies before the age of 5), approximately 10 do not reach the age of 5. Likewise, we can see that despite the fact that between 10 and 15 of the population of countries such as Brazil, Colombia, Ecuador, and Nicaragua will not reach the age of 40, life expectancy at birth in the same countries is over 60 and in many cases above 65. But beyond this insight, evidence can be solicited that proves that a low rate of inequality, high social spending, and a high degree of public spending on health care favor a more egalitarian way of reaching old age. Therefore, the standardized residuals of life expectancy at birth were estimated in connection with the possibilities of not surviving to age 40. The variable that arises from this operation was submitted to a regression analysis with different explanatory variables. The three key variables taken into consideration were the general inequalities measured by income, by public social spending as a percentage of GDP, and by public spending on health care as a percentage of public social spending. The results are shown in table 1.14. If the reasoning I have put forth is correct, then the higher the inequality, the higher its effects will be on the differences between life expectancy at the age of 40 and life expectancy at birth. In turn, if my reasoning is correct, the higher the general social spending and the higher the social spending on health care, the lower the gap between mortality before the age of 40 and life expectancy at birth will be. The three models give significant results, but the model incorporating all three variables is the one that shows the highest association coefficient, remaining statistically significant in all its independent variables and with betas producing the expected sign. The strong effect of inequality is particularly worth highlighting because it has a significant beta of more than 0.5 in all cases. In this context, a model ensuring access to health systems based on market incentives will tend to provide insufficient care to young risk groups and to provide excessive care to the elderly in better economic conditions. On the other hand, if systems are divided into segments in which the private subsector uses the public sector’s facilities and skims risks through insurance pricing, not only will the public sector be financing the private sector, but the system as a whole will also contribute to substantial added regressivity, specifically in diseases that require more expensive treatment.

46

the socioeconomic context

Life expectancy at birth (in years), 1998

78 Costa Rica

76

Chile Uruguay

74

Panama Argentina Venezuela Mexico

72

Colombia Paraguay El Salvador

70

Ecuador

Nicaragua

68

Dominican Republic Honduras

Peru Brazil

66 Guatemala

64 62

Bolivia

60 2

4

6

8

10

12

14

16

18

Probability at birth of not surviving to age 40 (% of cohort), 2000

Life expectancy at birth (in years), 1998

78 Costa Rica

76 Chile Uruguay

74

Venezuela 72

Panama Argentina Mexico

Colombia Paraguay

70 68

Dominican Republic Ecuador Honduras Peru El Salvador Nicaragua Brazil

66 Guatemala

64 62

Bolivia

60 0

20

40

60

80

100

Mortality of those under 5 years old in 2000 (per 1,000) fig. 1.5 Latin America and the Caribbean: Life expectancy at birth, percentage at birth not expected to survive to the age of 40, and infant mortality. Source: Prepared by the author from data in the consolidated global database.

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Table 1.14 Regression analysis on determinants of equality in survival beyond the age of 40 (standardized residuals of the probability of not surviving to the age of 40 and life expectancy at birth) 

Constant Gini Public social spending/GDP Public social spending on health/Public social spending F values Significance Adjusted R  Number of cases





Beta

Significance

Beta

Significance

Beta

Significance

.

.

— . −.

. . .

— . −.

. . .

−.

.

. . . 

. . . 

. . . 

Source: Prepared by the author from data provided by ECLAC (2002) and UNDP (2002).

Coverage, Eligibility Criteria, and Distributive Framework of Health Systems

The problem of employment and of the level of formality required to be part of the income insurance system is transferred, although in a less evident way, to the problem of health-system coverage. For health risk coverage, it is necessary to make a distinction between the aspects connected to basic prevention through vaccination systems and those related to primary, secondary, and tertiary care, which also show obvious differences among one another in coverage and access. Unlike education and social security intended for income maintenance, health has the advantage of allowing the establishment of a subgroup of universal ser vices materially differing from other types of ser vices. Each medical action—from care during labor to the types of medicines, treatments, and surgical interventions provided—can be separated and rendered with greater autonomy between one ser vice and another than the essential benefits of an educational and social security system. In fact, this has been the case in Latin America. This is partially why spending on health is significantly more progressive than spending on social security. This greater progressiveness is not derived from higher access to coverage in insurance systems based on social security mechanisms, but from coverage guaranteed from the public system and from a set of services with an access criterion that is not related to being insured in the formal system. If we compare gaps in access to health insurance systems with gaps in access to a specific ser vice such as immunization, it is clear that the gaps are larger in the insurance systems and much smaller for vaccinations. However,

48

the socioeconomic context

evidence on care during labor is less conclusive. Although it is clear that the poorest sectors have greater access to these ser vices than to the ser vices they receive through insurance, the gaps between quintiles can be larger than in the case of insurance. Whereas in the poorest quintile, less than one household out of ten is insured in Guatemala, Ecuador, El Salvador, Nicaragua, and Bolivia, one woman out of ten is insured for labor care in Guatemala, two out of ten in Bolivia, three out of ten in Paraguay, and four out of ten in Nicaragua. In turn, given the levels of immunization against tuberculosis and measles in these countries (between 80 and 100 for the general population), it is clear that coverage for immunizations in the poorest quintiles is, in all cases, above the levels of coverage for health insurance and for labor care as well. The fact that access to medications, like access to primary health care, is strongly stratified—although to a lower degree than access to health insurance contracted or assigned on a contributory basis—is due largely to the existence of segmented health systems. First, a leading group of the high-income population acquires health insurance almost completely from the private system; second, another part of the population has access to health care through solidarity systems that are based on contributions from the formal employment sector; and third, another portion of the population is limited to receiving health-care ser vices from insolvent public systems that provide limited ser vices. Finally, a major portion of the population in Latin America, particularly the rural and indigenous population, has no access whatsoever to health systems for tertiary care and very limited access to primary and preventive care. Four countries have solid noncontributory systems or systems integrated or semi-integrated among public, contributory, and private financing regarding ser vices and access: Brazil, with its single health system; Cuba, with a health system provided exclusively by the state; Colombia, with a complex structure combining a contributory and noncontributory basis and a program for the population that is in transition between one segment of the spectrum and the other; and Costa Rica, which subsidizes those who do not make contributions. The systems in the remaining countries in Latin America are strongly segmented between public and private care providers and have different access conditions, qualities, and ranges of ser vices for those who contribute to some kind of social insurance system than for those who do not. In countries where the forms of vertical solidarity (based on health care according to workers’ categories, or cooperative systems funded by prepayment and/or affiliation with corporations associated with formal employment formats) guarantee access to health insurance, economic crises and processes of increased informal employment generate insolvency in the systems. A considerable portion of the population loses its eligibility for access to health

Fault Lines in Latin American Social Development

49

ser vices in the private or cooperative system and must resort to the public system. But in these contexts, and in view of the structural problems of costs and sustainability that some of these old systems show, there is generally a demand for subsidies from the state to the mutual or cooperative system. Th rough this process, the state treasury is pressured both by increased demands on the public system because of insolvency in the insurance systems and by the request to support these systems financially. This pressure is combined with cream skimming by a booming private health insurance market from the vertical solidarity systems. Thus the solidarity-stratified systems are attacked from two flanks: the insolvency of those who can no longer access any private health systems and cream skimming from those who are looking only to pad their pockets. The problem often attributed to the universal Beveridge systems—predominant in the English-speaking Caribbean and attempted by Brazil for more than a decade now—is that they suffer in quality vis-à-vis private insurance markets. However, this problem exists equally in systems that are based on membership through health-care organizations or mutual-association modalities and in those that provide insurance through a formal link with the employment market. All of them suffer from cream skimming. When the state contributes to creating and even subsidizing these private markets, the effects are even more remarkable. When the state encourages the existence of a public sector with homogeneous and universal ser vices, the effect should be more moderate. An alternative is seen in Costa Rica, where a contributory system is subsidized by the state in order to guarantee access to those who do not have the capacity to contribute. This is substantially different from subsidizing a fragmented health system to bridge the gaps in expenditure by and contributions from the upper-income sectors. In that case, the effect is purely regressive; in Costa Rica, the effect is inclusive and progressive. Education and Its New Challenges

A social state’s ser vices are intended to play a major role in restructuring the system of social protection in Latin America; this role must acknowledge the dual pattern of family transitions. Apart from encouraging ser vices, it could advocate for an increase in monetary transfers to families with children so that these families can access health-care goods and ser vices in the market. The transformations indicated also imply a necessary redesign of the health insurance model, as mentioned earlier, and modifications to the rules governing the rights and duties of married parents, a topic that I will not discuss here. However, an important part of the investment venture to face this new risk structure should be oriented toward educational ser vices, given the nature of welfare framework restrictions on income transfers (although without

50

the socioeconomic context

abandoning change here as well). Education shows some positive effects and prevents, or at least has the potential to prevent, the reproduction of the current levels of inequality, compared with what happens with social security. This potential should be analyzed in the context of the intergenerational conflict that the current intragenerational distributive realities are enduring. Latin America shows not only very high levels of inequality but also a combination of fecundity and aging rates that puts a substantial social burden or a ratio of demographic dependency on the shoulders of active workers and the state treasury. The influence and power of seniors, and particularly of senior citizens who used to have a strong formal labor market insertion, tend to be present in these contexts and to tip the distributive balance in favor of this sector rather than in favor of the infant population. This is particularly true when we compare monetary transfers to the youth with monetary transfers to the elderly. We are inclined to think that families are responsible for their children, whereas the state is responsible for the elderly. In other words, there is a rather natural tendency to collectivize senior-citizen welfare and privatize childhood welfare, particularly when one is talking about money. In view of this situation, it is clear that because there is no renewed option for a welfare ser vices economy, the cash-transfer model will tend to prevail and will concentrate on monetary transfers to seniors. But this natural trend is supported by an essentially false hypothesis. This hypothesis affirms that the welfare of children can and will be properly protected by their families, whereas the elderly (particularly those with solid ties to the labor market) cannot have access to suitable welfare levels through private options. The evidence on levels of differential poverty between children and adolescents and senior citizens contradicts this hypothesis. Even if we completely suppressed the retirement and pension system throughout Latin America, the levels of poverty in this population (those over the age of 65) would be similar to or below the current percentages of childhood poverty (CEPAL 2003). Of course, I do not advocate such an extreme measure, but I do warn that if states do not assume a proactive attitude in defense of spending for the youth, they will tend to lose ground in a context of increasingly high demographic and combined burdens in favor of expenditures for seniors. Should this proactive attitude be focused on defending the current cash-transfer models for families with children (for example, Plan de Asistencia Nacional a la Emergencia Social in Uruguay; Programa de Educación, Salud y Alimentación in Mexico; and Plan Jefes y Jefas de Hogar in Argentina) or the old systems of family allowances existing in countries with higher relative welfare development? Yes to both, but only partially. The long-term strategy for facing the new risk structures should be oriented less toward monetary transfers and more toward an economy of ser vices from the state. Again, education is compelled to play a basic role here. The reasons for this

Fault Lines in Latin American Social Development

51

strategy are not only that it is politically easier to defend spending on health care and education for children (as opposed to monetary transfers to families with children), but also that a substantial part of the social risk faced by families, particularly from the urban lower-income sectors, requires the state to recover social governance, its capacity to direct and shape preferences, while renewing its educational contract with families. These needs for a new educational contract between school and family are related to the set of transformations associated with families and the specific configuration that they assume in the lower-income sectors, which we have tried to document earlier. Within the sectors that should lead the expansion of educational services, we can include educational services for early childhood. If we look at the school attendance rates of 5-year-old children in Latin America, we see a sharp increase from slightly more than 31 in 1990 to more than 45 in 1997 (CEPAL/ UNICEF/SECIB 2001). If we take the segment of ages from 3 to 5 for Latin America and the Caribbean between 1999 and 2007, it is possible to verify an increase of the rate from 56 to more than 65 (UNESCO 2010). These data clearly show that there has been a sharp increase in families’ demand and the supply of these ser vices, which is consistent with the statements made herein. The problem is that part of this important expansion in supply has occurred in the private and not the public sector, resulting in substantial gaps between the low-income and upper-income populations in access to this type of ser vice. If we take into account these ser vices for only the age of 5 (where education is more universalized), we can still see distances between the first quartile and the fourth quartile of income that range from a 20 enrollment gap in Uruguay (where the state encourages its universality) to 35 or more in Brazil, Guatemala, Costa Rica, and Honduras. The situation for children between 3 and 4 may be worse, not only in general coverage but also in gaps (UNESCO 2010). In addition to the creation and/or the expansion of a solid and public preschool pillar (or at least free through subsidies to supply or demand), extending the regular school day constitutes another key component of the state’s commitment to providing social ser vices in this framework of family-care economies. This process has already begun in some Latin American countries and is considerably advanced in Chile. A full or extended school day constitutes a fundamental “defamiliarization” mechanism (i.e., it fulfills or substitutes for daily social family functions, or what are currently called “economies of care”), whether through gradual expansion or through massive investment. However, when one looks at the growth of public social spending in Latin America, one can see that the pressures for an increase in social security spending are substantially stronger than those for education spending. Therefore, the growth of social spending has not always been a good solution to the

52

the socioeconomic context

increasing inequality that I have stressed in this chapter, or a mechanism that allows nations to face the real risk structures. The reason it has not been a good solution to inequality is because the growth in social spending has too often been based on previous expenditure structures superimposed on the overwhelming inequalities and lingering exclusive systems. Thus, despite the fact that social security expenditures have increased, this growth has reflected basic inequalities. The current targeted programs of social security or of the new reformist era (conditioned income programs) are much stronger than they used to be, but they have not been able to reduce the basically regressive (or neutral, in the best-case scenario) effect of Latin American social states’ spending through monetary transfers. This should not be surprising. In general, because these new-generation programs do not exceed 0.35 of GDP in any Latin American country, and because of the extremely high fragmentation of these and other programs (a legacy of the experiments in the 1990s), I do not believe that they will enable the evaluation of the multidimensionality of poverty (CEPAL 2005). There are no mid- to long-term strategic analyses, and there is a strong dependency on the short-term trends of multilateral credit agencies. In brief, the old systems with corporative and public bases and the new targeted programs do not seem to offer solutions that will allow social spending to have the opportunity to affect, at least in the midterm, the colossal economic inequalities or the different forms of exclusion from welfare and public goods that characterize the region. Among the different types of social spending in Latin America, spending on education, especially on primary schools, is the most progressive (CEPAL 2005). This progressiveness is due not to its targeted nature but to its universality. This is a simple lesson for all types of social spending and an opportunity for the educational system’s role in future Latin American social states. Universality with homogeneous spending per unit or, better still, with progressive compensatory spending in a context of overwhelming inequality constitutes the most powerful weapon to mitigate the inequalities and prevent the social exclusion that arises from them. Progressiveness and the increase in the social governance of the state are not the only advantages of strong investment in the educational system. Other advantages include positive effects on the challenges of work and the labor market in the region’s new economic and social context. In fact, education has three functions in the labor market, although only one is usually emphasized. First, education enables the provision of necessary human capital to the population. Second, because education is a ser vice that requires a high level of qualified personnel, it has a positive effect on current labor markets. Finally, because education is a ser vice with full potential for defamiliarization, it frees persons for the paid labor market. As a social policy, education

Fault Lines in Latin American Social Development

53

should encompass all three roles and not focus solely on its function as a producer of human capital. Women’s incorporation into the labor market is a positive aspect, but the reduced and lower incorporation of women from low-income sectors warns us about the risk of freeing personnel only in the highest sector of social stratification. The high reproductive burden of the poorest women and the impossibility of acquiring child-care ser vices in the market imply that if there is no expansion in the offer of ser vices, particularly at the early stages of raising children, the social result of the aforementioned transformations will be evidenced in higher labor participation among the middle and upper sectors exclusively. On the other hand, there is a positive interactive effect between entering the labor market and the decrease in fecundity. Therefore, education and educational ser vices for children between the ages of 0 and 6 must be prioritized if we want to make an impact in this area. Moreover, it is clear that an expansion of educational ser vices requires the massive incorporation of skilled personnel. These skilled persons can (partially) come from the freeing of the workforce caused by the same educational ser vices. In conclusion, this is the collectivization strategy for child care. The state extracts resources from the community to allot them to an educational effort that allows the partial collectivization of child care. Thus workers are freed in the same community, thereby increasing productivity and employment. This increase in employment will also help the state with a revenue base to finance welfare destined for the ser vices toward some of the most vulnerable sectors: mothers and their children.

Conclusions Inequality has always been an inherent characteristic of models of development, whether capitalist or socialist. But inequalities can be good or bad. There are also functional and dysfunctional levels of inequality for economic development. Latin America is full of bad inequalities (human resources, income from monopolies and political agreements rather than from innovation, and privileged systems of protection next to a total lack of coverage) at extreme levels. The problem under debate is no longer whether inequality is good or bad for economic development. The problem is that the current levels and forms of inequality in Latin America are simply incompatible with any credible route to human development because, among other factors, they are incompatible with economic development. Inequality has influenced social, economic, and political dynamics that inhibit the creation of virtuous circles among the different developmental spheres.

54

the socioeconomic context

Economic inequality thus affects the basis of institutionalized political forms and makes it extremely difficult to build social protection models that can receive support from different income groups while defending basic universal ser vices and a tax system that permits fi nancing from genuine state revenues. Finally, economic inequality is reflected in fecundity patterns and polarized family arrangements where the risk is focused on poor families and particularly on their children, who increasingly represent the majority in the biological reproduction of the Latin American countries. Deep inequalities and superficial states are the distinctive features of Latin American development. An additional, aggravating factor is that inequality has come of age. This means that countries have begun aging, and therefore, their inequality structures have become even more rigid. This increased rigidity has at least two causes. First, welfare states tend to focus their expenditures on seniors, and thus the share of spending that could have been allocated to attacking the original inequalities decreases. In other words, if we spend money on the last stages of people’s lives, the impact we can make on the forms of production and reproduction of inequality will be lower than if we did so at the beginning of their biological and economic life. Second, inequality is strengthened when fecundity rates decrease unequally because the biological reproduction of countries then rests on the poorest sectors. In fact, human development does not depend exclusively on the amount invested in social polices, but on how investment is made and how that investment affects current and intergenerational distributive aspects. If the riskproduction structure is transformed, the social protection framework should also be transformed. But the levels of inequality threaten this possibility in at least two ways. First, the changes in families, demographic patterns, urban geography, and employment that are typical of the postindustrial society generate new vulnerabilities that in a context of extreme past inequality become strongly stratified weaknesses. Some people can overcome them through the market; others can extract income from the state. But those who cannot choose from these alternatives because of a lack of market or political power are prisoners of the new vulnerabilities, which are now added to the previously existing vulnerabilities. Second, inequality affects the political collective capacities of defining new family, market, and fiscal agreements. Building state capacity in contexts of high social segmentation and sharp political power differentials is an intricate endeavor. The restructuring of the social and fiscal state is an instrument that is available for use within the context of the recent political transformations of Latin America. We cannot continue to gamble naively on abstract markets. They do not exist. Specific markets function in specific societies and are regulated in a poor, intermediate, or good way by specific states.

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Notes 1. We will consider the Human Development Index (HDI) as the measure for development. Th is index includes economic (Gross Domestic Product) and social dimensions of development (life expectancy, education). It classifies countries according to their level of human development. For more information on the HDI see UNDP (2002). 2. The consolidated database used in this exercise was created from data available in the UNDP’s Human Development Reports and in the World Bank’s World Development Report. 3. The cluster analysis corresponds to the hierarchical model with the single-linkage method for squared Euclidean distances. In this model, cases are classified according to their similarity in an n-dimensional space corresponding to the set of variables being considered, in order to associate cases through Euclidean distances. This method allows us to predetermine the desired number of clusters. The more clusters required, the greater their homogeneity in relation to the values of the cases in their different variables. I use this method in my analysis in an iterative manner, so that in the first iteration, all the cases are identified as a type in themselves; in the second iteration, the cases with greater similarity are combined in the configuration of the model’s variables’ values; and so on. Dendrograms allow us to view this operation graphically. At the beginning of the analysis, all the cases are different; at the end, they have been fitted together in a single type. Given the selection of the desired number of clusters, the iterations stop (even when the dendrogram shows iterations until the complete merging of cases) when one reaches the predetermined number of clusters. For example, the first dendrogram shows that in each iteration, the required similarity criteria become more flexible, and different cases are therefore added or merged. We can see how in the seventh or eighth iteration, there are three clusters: Argentina and Chile, Uruguay and Singapore, and the rest. If we wanted a model with only two clusters, we would continue softening our criteria until the twelft h combined distance or iteration in which the Uruguay and Singapore cluster and the Argentina and Chile cluster are merged, and the rest of the countries are kept in the previous cluster. 4. Because of the type of cluster classification analysis being proposed and for substantive theoretical reasons, the inclusion of developed countries differing in the set of the very radically incorporated variables of the group to be dealt with and also in key variables not taken into account, such as per capita GDP, would create the optical illusion of two big clusters, these countries and the rest. My analysis is limited to countries with similar HDIs in order to see whether it is possible to establish substantive differences among them. 5. It is worth mentioning that unlike Singapore, Uruguay moderates its inequality through a solid retirement system that covers the elderly. Nevertheless, in the younger population, inequality levels show a sharp increase (De Armas 2006). 6. Taiwan and Korea are not part of the Asian tigers data estimate because no suitable data are available in the database; therefore, this group consists solely of Hong Kong and Singapore. This substantially increases the urbanization rates of this group of countries. Korea would even out these rates. 7. The idea of risk refers to the notion of the existence of empirical trends in which it is possible to identify situations of social vulnerability linked to certain categories of the population (e.g., social class, sex, educational level). As the literature has pointed out, societies differ in the degree to which they produce and distribute the levels of social risk (Esping-Andersen et al. 2002; Huber and Stephens 2004). 8. In this respect, see Ana Sojo’s discussion (2003) of alternatives for joint financing and risk diversification in health and social security systems. Her perspective warns us about the illusion of avoiding current expenditures by ignoring demand in favor of future fiscal expenditures. To solve this intertemporal issue, she prefers a strengthening of the contributing systems through subsidies to the population unable to contribute to these systems in the necessary amount and density, and with continuity. This document is more inclined to assume those expenses in the present through noncontributing systems and to leave a less centralized function for the contributing systems, although they should still be relevant for the social protection system. Either way, it is clear that through noncontributing models or through subsidies to the contributing systems, the state cannot prevent the fiscal cost of present and future social risk unless it is willing to lose the fight for social cohesion. 9. Despite the positive aspects of the Brazilian experience regarding the expansion of social spending and the fiscal burden, aspects that merit praise, we should remember two warnings made

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by Afonso (2006): the increase in spending is supported by progressive initiatives, but also by old, regressive structures, and the fiscal increase has not followed a pattern that is consistent with GDP growth, nor has it been driven mainly by tax justice. 10. A recent study of the Uruguayan case reveals that in the best-case scenario, no worker in the poorest income quintiles (1 and 2) would be entitled to retirement rights at the age of 60 and that fewer than 20 would enjoy this benefit at the age of 65. The reforms that were undertaken in Chile in 2008 were pushed forth by equally worrisome data, because some estimates determined that 60 of the working population would not receive basic retirement or pension benefits. 11. Th is would be achieved without closing the global fiscal gap. Fiscal gaps in consumption, property, and external trade taxation would remain unchanged. It would close the fiscal gap only for current and potential income-tax collection. 12. For detailed data on these indicators, see UNDP (2004a) and CEPAL (2005). 13. Refer to the estimates performed by CEPAL in its Panorama social de América Latina (1999– 2000). It is clear that this finding on poverty levels is partially due to the fact that senior citizens live in multigenerational households with other sources of income in addition to retirement benefits. When the same exercise is performed for senior citizens living in monogenerational households, the impact of suppressing retirement benefits is substantially more remarkable.

References Afonso, José Roberto. 2006. “Universalización del gasto y diversificación de las fuentes de financiamiento: El caso de la Seguridad Social en Brasil.” Document presented at the international conference “Cohesión social en América Latina y el Caribe: Una revisión perentoria de alguna de sus dimensiones,” Panama City, September 7–8. CEPAL. 1999–2000. Panorama social de América Latina. Santiago, Chile: United Nations/CEPAL. ———. 2003. Panorama social de América Latina. Santiago, Chile: United Nations/ CEPAL. ———. 2005. Panorama social de América Latina. Santiago, Chile: United Nations/ CEPAL. ———. 2006. Shaping the Future of Social Protection: Access, Financing, and Solidarity. Santiago, Chile: United Nations/CEPAL. CEPAL/UNICEF/SECIB. 2001. “Construir equidad desde la infancia y la adolescencia en Iberoamérica.” Santiago, Chile: CEPAL/UNICEF/SECIB. http://www.oei.es /observatorio2/cepal00.pdf. De Armas, Gustavo. 2006. “Sociedad y políticas sociales en Uruguay desde la restauración democrática al triunfo de la Izquierda.” América Latina Hoy 44. ECLAC. 2002. Social Panorama of Latin America. Santiago, Chile: United Nations/ ECLAC. ———. 2006. Social Panorama of Latin America. Santiago, Chile: United Nations/ ECLAC. Esping-Andersen, Gøsta, Duncan Gallie, Anton Hemerijck, and John Myles, eds. 2002. Why We Need a New Welfare State. New York: Oxford University Press. Filgueira, Fernando. 1998. “El nuevo modelo de prestaciones sociales en América Latina: Residualismo, eficiencia, y ciudadanía estratificada.” In Ciudadanía y política social, edited by Bryan Roberts, 32–73. San José, Costa Rica: FLACSO. Filgueira, Fernando, and Cecilia Rossel. 2005. “Desigualdad, pobreza, y exclusión: Impotencia, fatiga, y asedio en las democracias Latinoamericanas.” In Política y gobierno en América Latina, edited by Ismael Crespo Martínez and Antonia Martínez Rodríguez, 32–73. Madrid: Tirant lo Blanch.

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Gómez Sabaini, Juan C. 2006. “Cohesión social, equidad, y tributación: Análisis y perspectivas para América Latina.” Paper presented at the international conference “Cohesión social en América Latina y el Caribe: Una revisión perentoria de algunas de sus dimensiones,” Panama City, September 7–8. Huber, Evelyne, and John D. Stephens. 2004. “Combating Old and New Social Risks.” Paper presented at the 14th International Conference of Europeanists, Chicago, March 11–13. Mesa-Lago, Carmelo. 2004. Las reformas de pensiones en América Latina y su impacto en los principios de la seguridad social. Financiamiento del desarrollo 144. Santiago, Chile: United Nations/CEPAL. Sojo, Ana. 2003. “Vulnerabilidad social, aseguramiento, y diversificación de riesgos en América Latina y el Caribe.” Revista de la CEPAL 80:121–40. Spruyt, Hendrik. 1994. The Sovereign State and Its Competitors. Princeton: Princeton University Press. Tobar, Federico. 1998. Reformas de los sistemas de salud en América Latina. Buenos Aires: Fundación Isalud. UNDP. 2002. Human Development Report: Deepening Democracy in a Fragmented World. New York: United Nations. ———. 2004a. Human Development Report: Cultural Liberty in Today’s Diverse World. New York: United Nations. ———. 2004b. Millennium Development Goals: Reducing Poverty and Social Exclusion in Hungary, Slovenia, the Slovak Republic, and the Czech Republic. Millennium Development Goals Report. Bratislava, Slovak Republic: UNDP. UNESCO. 2010. Early Childhood Care and Education Regional Report: Latin America and the Caribbean. Geneva: UNESCO. World Bank. 2004. World Development Report, 2004. Washington, D.C.: World Bank.

2

Inequality of Opportunity in Latin America: Economic Well-Being, Education, and Health Anna Crespo and Francisco H. G. Ferreira

Introduction Many Latin American countries are among the most unequal countries in the world. According to the World Bank (2005), more than half the countries in Latin America have (income) Gini coefficients above 0.50. And income inequality is only one of the many dimensions of inequality observed in the region. There is also abundant evidence of large disparities in land holdings, educational attainment, and health outcomes, as well as in the allocation of power and influence. Although many observers decry these high levels of inequality in various outcomes in and of themselves, there is even more widespread opposition to those parts of these inequalities that arise from differences in life chances or initial opportunities. These are outcome differences brought about by circumstances entirely beyond individual control, such as one’s gender or race, the place where one was born, or the family one was born to. A vigorous literature in philosophy and increasingly in economics argues that opportunity is the appropriate “currency” for egalitarian justice. It has also been argued that in addition to being intrinsically unfair, inequality of opportunity may be detrimental to economic efficiency. The crux of this argument is that depriving a large share of the population of the opportunity to acquire human capital or to make other potentially profitable investments reduces the economy’s overall pool of talent and investment portfolio. The authors are grateful to Jérémie Gignoux for permission to draw on earlier work written jointly with him, and to participants at two workshops at the University of Miami for helpful comments on an earlier version. All errors are our own. The views expressed in this chapter are those of the authors and should not be attributed to the World Bank, its executive directors, or the countries they represent.

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An additional hypothesis suggests that large wealth inequalities may translate into political inequalities that create and reproduce vitiated institutions of governance. Such institutions may be better suited to preserving entrenched privilege than to promoting competition and innovation. For a review of these arguments, see Bourguignon, Ferreira, and Walton (2007) and World Bank (2005). In these views, not all inequality is equally objectionable. Outcome gaps that reflect differences in effort and can be traced back to different choices made by individuals are seen as less unjust than those that reflect differences in initial opportunities, and for which individuals cannot be held responsible. But in that case, different types of inequality call for differentiated measurement, that is, for the ability to decompose overall inequality into its constituent parts. Such decomposition lies at the heart of the recent literature on measuring inequality of opportunity in practice. In this chapter, we review and extend that part of this literature that has focused on Latin America. Regardless of which specific outcome one is looking at, the basic idea is to break down overall inequality into two parts. The first component is the part of outcome heterogeneity that can be attributed to morally irrelevant, exogenous circumstances: factors over which individuals have no control. The second component arises from choices and decisions made by individuals—what the literature calls “efforts.” An important complication arises from the obvious fact that individual choices are affected by circumstances. A person’s family background affects his or her future income levels both directly (e.g., through a parent’s ability to help his or her child find a job) and indirectly, by influencing his or her own future choices and decisions (e.g., through a parent’s influence on the child’s attitude toward his or her studies). How should these indirect effects of circumstances be treated? Should the effect of race, gender, place of birth, or family background on a person’s own effort decisions be counted as part of the first component (inequality of opportunity) or of the second (as “socially acceptable” reward to efforts)? Different schools of thought on equality of opportunity have different views on this question, and this is not the place to dwell on the finer points of that debate. Suffice it to say that following Roemer (1998), we (and the studies we review) treat both direct and indirect effects of circumstances on outcomes as opportunity-related, and we identify these combined effects as inequality of opportunity. Figure 2.1 illustrates this point. The first component of inequality in any outcome of interest arises from differences in circumstances. The second component comes from differences in “efforts” (or choices), as well as luck. Our measures of inequality of opportunity seek to capture the overall effect of heterogeneous circumstances: both the direct effect (arrow 1) and the indirect impact through choices and efforts (arrows 2 and 3).

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DIFFERENCES IN CIRCUMSTANCES

1

INEQUALITY OF OUTCOMES

2

3

DIFFERENCES IN EFFORTS OR CHOICES

fig. 2.1 Direct and indirect effects of circumstances on outcomes. Source: Authors.

But how is this decomposition implemented in practice? Although the conceptual and philosophical literature on inequality of opportunity dates to the late 1980s, the empirical literature on its measurement is much more recent. Nevertheless, a few approaches have already been proposed. A nontrivial share of the empirical literature has focused on Latin America and has concerned itself primarily with inequalities of economic and educational opportunity. Bourguignon, Ferreira, and Menéndez (2007) assessed differences in the share of inequal ity of opportunity across different cohorts of Brazilian workers in 1996. They found that between 18 and 34 of earnings inequality was accounted for by opportunities, depending on the cohort. Cogneau and Gignoux (2009) considered the evolution of inequality over time (rather than simply across cohorts), also in Brazil, between 1976 and 1996 and found that whereas total inequality was rising during this period, inequality of opportunity declined slightly. Waltenberg (2007) looked at inequality of educational opportunity in Brazil and found that inequality of opportunity could account for about 16 of the overall inequality in test scores. He also provided evidence of large variation in inequality of opportunity across regions within Brazil. In this chapter, we review the most recent results on inequality of opportunity in Latin America with the objective of providing a broad perspective on the distribution of life chances in the continent. We look at three different welfare concepts—or “advantages,” in Roemer’s terminology—and review results for economic well-being (measured by earnings, income, and con-

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sumption), educational achievement, and child health and nutrition. We also examine as many countries as the data permit within each of these concepts by drawing on two recent comparative studies and by conducting some original comparative work of our own. Comparisons are made along three dimensions: among countries, among welfare concepts, and among the specific circumstances that together define the opportunity sets. The added value of this chapter, we hope, lies precisely in the breadth of these three sets of comparisons, which we believe are new in the literature. The chapter is organized as follows. The next section contains a brief, nontechnical summary of how inequality of opportunity is defined and measured in the remainder of the chapter. This summary explains how the decomposition discussed earlier is actually calculated. The third section reviews the evidence on the extent of inequality of economic opportunity in Latin America, drawing primarily on an analysis of earnings, income, and consumption distributions in Ferreira and Gignoux (2008). The fourth section turns to inequality of educational opportunity, relying mostly on measures of educational achievement from Program of International Student Assessment (PISA) test-score data, discussed in Ferreira and Gignoux (2007). The fifth section presents some original estimates of inequality of opportunity for a healthy childhood in five Latin American countries, using measures of nutritional adequacy calculated from the Demographic and Health Surveys. The final section presents our conclusions.

How Is Inequality of Opportunity Measured? Although there is an extensive theoretical literature that explores the concept of inequality of opportunity, methods to quantify it empirically have only recently been developed. This section aims to summarize some of the main approaches, paying special attention to those that decompose overall inequality into an amount due to inequality of opportunity and a residual term. Roemer (1998) is the starting point for most methodologies that attempt to measure inequality of opportunity. It is his basic distinction between circumstance and effort variables that allows applied economists to think of income (or some other suitable outcome of interest) as a function of circumstances, efforts and an error term, which includes factors such as luck. Although circumstances are (economical ly) exogenous by definition, “efforts” should be thought of as a function of circumstances. The simplest structural model is therefore given by something like y i = f (C i, E i, u i) E i = g (C i, v i)

(1)

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where y i represents the outcome of interest, for example, income or education, of individual i. Ci and Ei are vectors of circumstances and effort variables for individual i, respectively. The error terms are represented by ui and v i, and g(Ci, v i) stands for a set of equations, one for each effort variable. In Roemer’s view, equality of opportunity requires that there be no difference in the distributions of advantage across groups of people who differ only in their (morally irrelevant) circumstances—this is his “level the playing field principle.” This statement, of course, is identical to requiring that the distribution of the outcome of interest be independent of every single circumstance variable, that is, F( y | C) = F( y). Given (1), this requirement implies that circumstances should affect the outcome of interest neither directly nor through the effort variables, as discussed in the introduction of this chapter and illustrated in figure 2.1. For instance, if the outcome of interest is earnings and the circumstance under consideration is gender, equality of opportunity implies that male workers have the same earnings distribution as female workers, both because there is no direct discrimination on the basis of gender and because there are no differences in the distribution of educational achievement across genders. In practice, of course, equality of opportunity is not the norm. In other words, the distributions of outcomes such as earnings, per capita incomes, and even school attainment are generally affected by circumstances, as well as efforts. One obvious approach to measuring inequality of opportunity, therefore, is to seek to quantify by how much F(y | C) differs from F(y). The first step in estimating empirically the share of the overall inequality due to inequality of opportunity is to define a set of circumstance variables to be considered, because not all circumstance variables might be observable. In the next sections two different methods of estimation, parametric and nonparametric, will be presented. The appendix presents an overview of the intuition behind them.

Inequality of Economic Opportunity in Latin America This section summarizes the main findings on inequality of economic opportunity in Latin America. Inequality of opportunity is always measured with respect to a particular outcome, or “advantage.” There is more or less opportunity for something. Economic opportunity has typically been analyzed with respect to individual labor earnings or household incomes and household consumption (usually on a per capita basis). Labor earnings are one of the main components of total income, and there is some evidence that they may also directly affect social status and self-esteem. However, earnings are not a comprehensive indicator of welfare because they do not include other sources

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of income and ignore resource pooling within the household. Therefore, household per capita income and consumption may actually be more appropriate measures of economic well-being. The most comprehensive studies of economic opportunity in Latin America to date are Ferreira and Gignoux (2008, forthcoming), which contain a comparison of six countries: Brazil, Colombia, Ecuador, Nicaragua, Panama, and Peru. This section draws heavily on their analysis. As pointed out in the introduction of this chapter, inequality in economic welfare—whether measured through earnings, income, or consumption—is generally high in Latin America. However, there is also some variation across countries. For instance, among the six countries analyzed by Ferreira and Gignoux (2008), the mean log deviation indexes for labor earnings vary from 0.57 to 0.79. Similar variation obtains for other measures of inequality. Given the profi le of inequality in the region, several questions follow. What share of these inequal ity levels is accounted for by differences in opportunity? Does inequality of opportunity explain a large fraction of the overall inequality in welfare observed in Latin America? Furthermore, is inequality of opportunity proportionally larger where overall inequality is also higher? That is, is there a positive correlation between highly unequal opportunities and overall inequality? In order to answer these questions, Ferreira and Gignoux (2008) used data from the Brazilian Pesquisa Nacional por Amostragem de Domicílios (1996), the Colombian Encuesta de Calidad de Vida (2003), the Ecuadorean Encuesta Condiciones de Vida (2006), the Guatemalan Encuesta Nacional sobre Condiciones de Vida (2000), the Panamanian Encuesta de Niveles de Vida (2003), and the Peruvian Encuesta Nacional de Hogares (2001). Although these surveys (countries and waves) were selected largely because they contain reasonably comprehensive and comparable information on individual circumstances, the set of countries that results is not particularly unrepresentative of the region and does contain about half its population. In order to make it possible to compare data easily across countries, Ferreira and Gignoux (2008) created uniform circumstance sets using the following variables: race or ethnicity, father’s occupation (except for Colombia and Peru, because this information was not available in the surveys), father’s education, mother’s education, birth region (or type of area of birth), and gender (only for the analysis of labor-earnings inequality). The race/ethnicity variable was measured either by self-reporting or by the person’s ability to speak an indigenous language. Parents’ educational attainment was classified into three categories: no education or unknown, primary education, and secondary or more. Father’s occupation was coded simply as agriculture related or not agricultural. Finally, place of birth was coded as one of three regions, defined according to the level of development, except for Panama, where birth region was defined by the type of area (rural or urban).

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Guatemala

Peru

Ecuador

Brazil

Colombia

Panama 0

0.1

0.2

0.3 0.4 0.5 Theil’s mean log deviation index

Parametric

Nonparametric

0.6

0.7

Residual

fig. 2.2 Decomposition of labor-earnings inequality into inequality of opportunity and a residual term. Source: Ferreira and Gignoux (2008).

Figure 2.2 shows earnings inequality levels for all six countries. It also depicts lower-bound estimates of the component of inequality associated with the above population partition by exogenous circumstances, using both the nonparametric and the parametric decompositions of the Theil-L inequality index, as described in the appendix. Because the Theil-L index is a pathindependent decomposable measure, the only estimates of the opportunity share of inequality in these partitions are the parametric and nonparametric alternatives. The darker areas represent the parametric estimates, while the nonparametric estimates correspond to the lighter and darker shades combined. The results presented in figure 2.2 help shed some light on the questions raised earlier. First, inequality of opportunity accounts for a sizable, but not dominant, fraction of earnings inequality. At the lower bound, unequal predetermined characteristics explain approximately 20 of earnings disparities in Colombia and up to 35 in Brazil (using the nonparametric estimates), or 17 to 34 in the parametric approach. Given that these are lower-bound estimates, that is, given that measures of inequality of opportunity are likely to underestimate the contribution of uneven opportunities to overall inequality, these are not insubstantial numbers. In fact, only individuals with positive earnings are included in this analysis, and therefore these approaches do not take into account selection into the labor force, which might also be affected by unequal opportunities. Circumstances might be fundamentally

0.8

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important in defining the probability of getting a job, and this factor provides additional support for the argument that the results represent only the smallest possible role for circumstances. Furthermore, Ferreira and Gignoux (2008) restrict the number of categories for each circumstance variable to be three or fewer “so as to reduce the number of ‘circumstance group’ cells with zero or very few observations.” This is an additional reason that the results tend to underestimate the level of inequality of opportunity observed in the analyzed countries. For instance, among the children of fathers in nonagricultural occupations are both the children of street vendors and the children of businessmen. It is reasonable to expect that the children of street vendors are likely to face worse opportunities throughout their lives, although these gaps are ignored in the results reported in figure 2.2. Cogneau and Gignoux (2009) use a slightly different methodology to compute the share of overall inequality in earnings due to unequal opportunities with two different definitions of circumstance sets in Brazil in 1976, 1982, 1988, and 1996. In one exercise, they deliberately limit the set of circumstance variables in use and consider only information on the father’s education and occupation. The resulting partition contains only 9 circumstance groups: “(1) never went to school and was a farmer, (2) never went to school and had another occupation, (3) was merely literate and was a farmer, (4) was literate and had another occupation, (5) completed one of the first four years of primary education and was a farmer, (6) completed one of the first four years of primary education and had another occupation, (7) completed one of the four years of upper primary education (5–8), (8) completed nine or more years of education, and (9) the interviewee was unable to answer.” Elsewhere in their essay, they include finer partitions of father’s occupation and additional circumstance variables, such as race and birth region, resulting in 128 circumstance groups instead of the 9 groups defined above. They report that there was not much increase in the share of inequality due to uneven circumstances when 128 circumstance groups were used instead of 9. Another conclusion from figure 2.2 is that the rank of overall inequality is not the same as the rank of inequality of opportunity. In fact, the rank correlation is only 31. For instance, Colombia displays the smallest index of inequality of opportunity but is more unequal than Panama. If one considers the share of inequality explained by unequal opportunities, Brazil is by far the most opportunity-unequal country, but it is only the fourth most unequal in the overall inequality of labor earnings. Figure 2.3 displays results analogous to those in figure 2.2, but for household per capita income. The fraction of the overall inequality that is explained by inequality due to uneven circumstances is generally somewhat larger for income than for earnings, ranging from 23 to 35 across the six countries (on

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Brazil

Panama

Guatemala

Colombia

Peru

Ecuador 0

0.1

0.2

0.3 0.4 0.5 Theil’s mean log deviation index Parametric

Nonparametric

0.6

0.7

Residual

fig. 2.3 Decomposition of household per capita income inequality into inequality of opportunity and a residual term. Source: Ferreira and Gignoux (2008).

the basis of parametric estimates). Once again, country rankings by overall inequality and by opportunity share do not coincide, although the rank correlation in this case is much higher (about 60). Guatemala, where more than a third of the overall inequality in incomes is due to uneven circumstances, ranks third in overall inequality. Ferreira and Gignoux (2008) attribute the fact that opportunity shares are somewhat higher for incomes than for earnings to the fact that in addition to earnings capacity, predetermined circumstances are also likely to affect other important determinants of household income, including household composition (the choice of one’s partner and the number of children, for example), as well as other forms of income (such as capital income or transfers). In fact, the pattern found in the data suggests that inequality of opportunity in these domains tends to reinforce the inequality of opportunity that operates through the earnings channel in Colombia, Ecuador, Guatemala, Panama, and Peru, but not in Brazil. The decomposition of consumption inequality follows a similar pattern; figure 2.4 displays the results. Although overall observed inequality is lower in the distribution of consumption expenditures than in the income distribution, the role that inequality of opportunity plays in explaining consumption inequality is considerably larger. The shares associated with inequality of opportunity in the distribution of consumption expenditures range from 24 in Colombia to 50 in Guatemala. This result is consistent with the hypothesis that earnings- and income-based measures of inequality of opportunity tend

0.8

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Colombia

Guatemala

Panama

Ecuador

Peru

0

0.1

0.2

0.3 0.4 0.5 Theil’s mean log deviation index Parametric

Nonparametric

0.6

0.7

Residual

fig. 2.4 Decomposition of household per capita consumption inequality into inequality of opportunity and a residual term. Source: Ferreira and Gignoux (2008).

to underestimate lifetime inequality of opportunity because greater measurement error and transitory income variance are lumped together with inequality due to different choices and efforts in the residual term. If the goal of policy is to reduce inequality of opportunity, it is fundamental to understand the impact of each particular circumstance in generating it. Figure 2.5 shows the partial effects of each circumstance, computed for each country. The radar picture displays the fraction of overall inequality due to inequality of opportunity arising from each specific variable when the other circumstances are held constant. This means, for example, that, as illustrated in figure 2.5, in Brazil about 10 of the inequality in household per capita income can be explained by the race of the household head alone. Because gender was not included among circumstances in the per capita household income and consumption analysis, the results for the partial effect of gender in earnings inequality are not reported in figure 2.5. The countries where gender was most important were Brazil, Ecuador, and Guatemala, where the partial effect of this variable ranged between 3 and 5. In all the graphs included in figure 2.5, family background is unmistakably the most important factor. Above all, mother’s education is systematically strong in all countries and alone explains 9 to 12 of the total inequality. It is followed by father’s education and occupation in most countries. Another interesting fact illustrated in this figure is that there seems to be a pattern that each circumstance explains a larger share of the inequality in consumption than in income or earnings. This is consistent with the earlier discussion

0.8

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Brazil

Ecuador

Race

0.2

0.15

0.15

0.1 Birth region

Race

0.2

0.1 Father's occupation

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Father's education

Guatemala

Father's occupation

0.05

Mother's education

Father's education

Panama

Race 0.3

Race 0.2

0.24

0.15

0.18 0.1 0.12 Birth region

Father's occupation

0.06

Birth region

0

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Mother's education

Father's education

Colombia

Birth region

Father's occupation

0.05

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Father's education

Peru

Race

Race

0.2

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0.1

0.1

0.05

0.05

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Father's education

Mother's education Earnings

Birth region

0

Father's education

Mother's education Household per capita income

Household per capita consumption

fig. 2.5 Partial effects of each circumstance on inequality of economic opportunity, selected countries. Source: Ferreira and Gignoux (2008).

on consumption being a better indicator of long-term welfare, or permanent income, and thus having less measurement error or transitory variance in the residual. To sum up, a sizable fraction of the overall inequality in labor earnings and in household per capita income and a larger share of consumption inequality in the six Latin American countries under consideration are associated with inequality of opportunity. Even though our results are lower-bound

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estimates that are likely to understate the true opportunity shares of inequality, the figures can be as high as 50 (for consumption in Guatemala). The most important individual circumstance variables in accounting for overall inequality are those related to family background, measured through parents’ education and, when available, father’s occupation. In addition, there is very limited support for the claim that the most outcome-unequal countries are necessarily those with the most unequal opportunities within Latin America.

Inequality of Educational Opportunity Although access to basic education, measured, for instance, by primary-school enrollment, is higher in most of Latin America than elsewhere in the developing world, and although gender gaps in enrollment, attainment, and achievement are generally small, overall levels of inequality both in school attainment and in the quality of schooling remain substantial within most countries in the region. For instance, the Gini coefficients for years of schooling in Colombia, the Dominican Republic, El Salvador, Guatemala, and Nicaragua are all above 50 according to de Ferranti et al. (2003). In addition, although there has been considerable progress in the quantity of education in most Latin American countries in past decades, it has not been matched by increases in quality (Hanushek and Woessmann 2007). Mizala, Romaguera, and Urquiola (2007) and Albernaz, Ferreira, and Franco (2002) show evidence for Chile and Brazil, respectively, that school quality and students’ socioeconomic status are strongly correlated. Because educational achievement is widely seen as a constituent component of welfare of inherent independent value, in addition to being an important input into earning potential and political participation and influence, an understanding of the role of opportunities in determining its distribution is critical for a broader understanding of inequality of opportunity in the region. Most studies so far have focused on inequality in attainment, largely measured by years of formal schooling completed. However, given differences in educational systems across countries, as well as remarkable heterogeneity in school quality within countries, the use of years of schooling to measure education is less than ideal. Ferreira and Gignoux (2007) therefore look at inequality of opportunity in educational achievement by using test-score data from the Program of International Student Assessment (PISA) of the OECD, which surveyed 15-year-old students in several countries in 2000 and 2002. The principal advantages of these data are the high levels of comparability across countries and the fact that they included five Latin American countries: Argentina, Brazil, Chile, Mexico, and Peru, in addition to many others

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outside the region. All the surveyed children took standardized tests in reading, and approximately half were examined in mathematics. Although the PISA data are extremely rich, they are not problem free. Two caveats are particularly important. First, there is a sample-selection issue: samples were selected in each country so as to be representative of the population of 15-year-olds attending school, rather than of the overall population in this age group. Results are therefore representative of the subpopulation who stay in school until that age, which is clearly a selected population. In particular, it is plausible that a more opportunity-unequal country might have a lower rate of enrollment at 15 years of age. That aspect of inequality of opportunity is ignored in these data, and to the extent that those students might have had low scores had they remained in the system, the estimates we obtain understate true inequality of opportunity. The second caveat concerns the measurement of inequality in a standardized variable. Exam questions have different levels of difficulty, necessitating the use of item-response theory methods to allow examiners to estimate the student’s latent ability from his or her test score. These methods yield a distribution of plausible values with an indeterminate metric. A standardization of the distribution is then performed in an attempt to construct distributions with the same mean and variance. This standardization implies both a translation of the mean and a rescaling of the dispersion in the original distribution. Because no acceptable inequality measure is simultaneously scale and translation invariant, no inequal ity measure is capable of deriving the inequality in the original distribution from the transformed distribution. Fortunately, as Ferreira and Gignoux (2007) show, there exist some inequality measures (of the variance and Gini families) for which ratios of inequality do satisfy both properties. Although it is therefore impossible to ascribe precise meaning to inequality measures of standardized test scores, measures of inequality of opportunity (which are ratios of between-group inequality to total inequality) applied to the same distributions are meaningful. Having chosen an appropriate index for the decomposition, let us consider the circumstance variables available in the PISA data. Ferreira and Gignoux (2007) use the student’s gender, mother’s education, father’s education, father’s occupation, and school location (except for Peru, where this information was not collected). In this context, parent’s education was divided into five categories: no education, primary education (or unknown level), lower secondary education, upper secondary education, and college education. Father’s occupation was coded as one of three categories. The first includes legislators, senior officials and professionals, technicians, and clerks; the second contains ser vice workers, craftsmen, related trade workers, plant or machine operators, and assemblers; and the last one consists of skilled agricultural and fishery workers, unskilled occupations, or unknown. Finally, school location was coded as villages and small towns (fewer than 15,000 inhabitants), towns

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Peru

Chile

Brazil

Mexico

Argentina

0

0.1

0.2

0.3

Generalized entropy index Parametric estimates

Nonparametric estimates

fig. 2.6 Opportunity share of inequality in achievement: Mathematics. Source: Ferreira and Gignoux (2007).

Brazil

Peru

Chile

Mexico

Argentina

0

0.1

0.2 Generalized entropy index

Parametric estimates

Nonparametric estimates

fig. 2.7 Opportunity share of inequality in achievement: Reading. Source: Ferreira and Gignoux (2007).

(between 15,000 and 100,000 inhabitants), or cities (more than 100,000 inhabitants). Figures 2.6 and 2.7 display the shares of inequality in educational achievement due to inequality of opportunity in mathematics and reading, respectively. The darker bars represent the parametric estimates, while the nonparametric estimates correspond to the darker and lighter areas combined.

0.3

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Predetermined characteristics now account for between 15 and 25 in all countries, or a little more if the nonparametric estimates are preferred. Interestingly, with the exception of mathematics in Peru (a country where information on school location is missing), the opportunity share of inequality is quite similar across countries in both reading and mathematics. As expected, the difference between the nonparametric and parametric estimates is smaller for reading achievement because the sample that took this exam is larger. The fact that these shares are relatively similar across the five countries is interesting, particularly because total inequality in achievement appears to differ considerably (subject to the earlier caveat on interpreting these levels). The inequality indexes are 0.023 in Mexico, 0.03 in Chile, 0.043 in Brazil, 0.048 in Argentina, and 0.067 in Peru for achievements in mathematics. Similarly, the indexes are 0.021 in Mexico, 0.024 in Brazil and Chile, 0.034 in Argentina, and 0.043 in Peru for achievements in reading. In addition, although overall opportunity shares are similar across countries, partial effects differ markedly. This is in contrast to the pattern for inequality of economic opportunity, described in the preceding section, where overall shares differed more sharply across countries than did the ranking of partial effects. For educational achievement, mother’s education and father’s occupation remain important circumstances in determining overall inequality, but their relative importance varies across countries, as seen in figure 2.8 (which is analogous to figure 2.5). For example, in Mexico, school location seems to matter more than family background, especially in determining inequality in reading achievements. Exploiting the availability of PISA data for most OECD countries, Ferreira and Gignoux (2007) compare inequality of opportunity in education in Latin America with that inequality in a number of developed countries. They find that the opportunities for educational achievement are clearly less well distributed in Latin America than in most (though, interestingly, not all) richer countries. Figure 2.9 presents the parametric estimates for inequality of opportunity shares across fourteen countries. In all developed countries except Germany, inequality of opportunity accounts for less than 20 of inequality in reading achievement, but the inverse is true for Latin America, where that share is above 20 for all countries except Brazil. The picture is somewhat more mixed for inequality in mathematics achievement, with four OECD countries (Spain, the United Kingdom, the United States, and Germany) having opportunity shares in the same range as the Latin American countries. Nevertheless, even in mathematics, the remaining OECD countries (Finland, Italy, Canada, Sweden, and France) all display smaller opportunity shares of inequality than the Latin American countries. Although, in general, family background seems to be the most important individual circumstance variable, gender appears to play a relatively more important role in inequality in reading achievements in developed countries, and its explana-

In e qual ity of Opportunity in Latin America Argentina

Brazil

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Chile

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0

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Peru

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Mother's education

Gender 0.15

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0

Father's education

Mother's education Mathematics

Reading

fig. 2.8 Partial effects of each circumstance on inequality of educational opportunity, selected countries. Source: Ferreira and Gignoux (2007).

tory power ranges from 8.2 to 1.3, in comparison with 2 or less in Latin America. In summary, despite the difficulty of measuring inequality in education, it is possible to provide strong evidence that Latin American countries are characterized by high levels of educational inequality that are partially explained by inequality of opportunity. In addition, the fraction of inequality associated with exogenous characteristics seems to be broadly similar across

the socioeconomic context

Germany

Mexico

France

Sweden

Canada

Italy

Finland

0.1

U.K.

Spain

U.S.

Chile

Peru

Brazil

U.K.

Spain

U.S.

Sweden

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0.2

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Argentina

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Germany

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Mathematics

fig. 2.9 Opportunity share of inequality in achievement: Mathematics and reading. Source: Ferreira and Gignoux (2007).

Latin American countries, while more variance can be observed in overall inequality in educational achievement. As in developed countries, family background plays a major role among the exogenous variables included in the circumstance sets, but the opportunity share of inequality is generally larger in Latin America. Because sample selection is less of an issue in richer countries (because enrollment at age 15 is more nearly universal), the differences we find between Latin America and the OECD might be, if anything, underestimated.

Inequality of Opportunity for a Healthy Childhood Health, like education, is an important dimension of human capital and thus a determinant of future earnings. At the same time, health is also a constituent dimension of welfare itself. Although income or consumption are more frequently used to measure well-being, one should remember that without health, people are not able to enjoy their incomes in the same way as if they were healthy. Recognizing the importance of longevity and health, the literature has recently sought to combine income and life expectancy, for instance, in a more comprehensive measure of the “quantity and quality of life.” Like income and educational achievement, health status is also unequally distributed. Although there is a burgeoning literature on the measurement of overall health inequality (which focuses predominantly on how health and socioeconomic status correlate), we are not aware of any attempt to quantify

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the share of the inequality in health that is attributable to differences in opportunity. One reason for this is that good health data are often available for children more easily than for adults. This raises the difficult question whether it makes sense to attribute any share of the (child health) outcome to personal effort or individual choices. The argument that one should not hold young children responsible for any part of their health outcomes is certainly appealing because they have little influence on the main decisions that determine their health status. In this sense, one could argue that all inequality observed in child health is inequality of opportunity. A decomposition exercise analogous to the ones conducted for incomes and test scores would therefore have to be interpreted differently in the case of child health. Variations in height for age or weight for height, for instance, have three basic sources: genetic differences (nature), differences in care and upbringing (nurture), and random and idiosyncratic factors (“luck”). Nurture refers to factors that, although exogenous to the child, respond to parental or other social effects, both before and after birth. The share of the variation in the health outcome of interest that is associated with ascribed circumstance variables, such as gender, place of birth, or family background, can therefore be interpreted as a lower-bound estimate of the “nurture” component of child health. This is of interest because it is the component that reflects social and family conditions that may be amenable to policy interventions, unlike genetic or idiosyncratic factors. If the distribution of the genetic endowments that determine height, for example, is independent of parental education, race, and place of birth, then it is reasonable to interpret differences in average height for age across population subgroups defined by these characteristics as being due to “social” or “nurture” factors. It may be that poverty, which can affect the quality of nutrition, is more prevalent in some groups than in others. It may be that information about appropriate diets during pregnancy is not equally available to all groups. It may be that in some regions, boys are preferred over girls, and resources are allocated unequally. Possible policy implications, if any, clearly depend on the specific cause of the difference. But the decomposition of variation into “nurture” and other factors may be a meaningful initial diagnostic tool. We explore this decomposition for three commonly used indicators of child health and nutrition: the height-for-age, weight-for-age, and weight-for-height z-scores of children aged 0 to 5. The z-score measures are normalizations of the actual distribution of the outcome of interest to provide comparability across children in different age/gender groups. For instance, the height-for-age z-score is constructed by normalizing the height of a child with respect to the height distribution of well-nourished children of the same age and gender, following the recommendations of the World Health Organization. According to the WHO Working Group (1986), the most appropriate way to account

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for the nutritional status of children under 5 years old is through anthropometric measures. While height is informative of long-run nutritional status, weight can account for current caloric intake. Episodes of negative health shocks, as well as the mother’s condition during pregnancy, are likely to be directly reflected in children’s height and weight when they are still very young. In contrast, genetic factors play an important role only later, especially during adolescence. The data used are taken from the Demographic and Health Surveys for the following five countries: Bolivia (2003), Colombia (2005), Dominican Republic (2002), Nicaragua (2001), and Peru (2004). These are the most recent surveys available for Latin America with information that is directly comparable. The set of circumstances we use to partition the population is slightly different from the ones discussed in the preceding sections. The variables common to the analysis here and the analyses presented earlier are mother’s education, father’s education and occupation, and place of birth. Additionally, the circumstance set includes information about household size and wealth. Parents’ education was coded as no education, primary, secondary, or higher. Father’s occupation was divided into five groups: (1) professional and managerial, (2) administrative jobs and sales, (3) agricultural, (4) other skilled occupations, and (5) other nonskilled occupations. Place of birth was coded as urban or rural. Wealth is measured as an index according to the number of durable goods in the household. Excluding empty cells, this classification of circumstances resulted in partitions of 2,717 cells in the Dominican Republic, 2,585 cells in Colombia, 2,093 cells in Nicaragua, 2,062 cells in Bolivia, and 934 cells in Peru. The measure of inequality used in this subsection is the variance of the z-score distributions. The fractions of inequality in those z-scores due to the observed circumstances in each country are shown in figure 2.10, estimated parametrically. There is a large variation, both across countries and across outcomes, in the amount of inequality that can be explained by the “nurture” component. The observed predetermined characteristics account for a greater share of the total inequality in height for age than in the other two measures in all countries except the Dominican Republic. The fraction of inequality in height-for-age z-scores due to observed characteristics ranges from 7 in the Dominican Republic to 22 in Peru. Weight-for-age and weight-for-height z-scores are more strongly related to current level of caloric intake, while the height-for-age measure reflects the long-run effects of nutrition. Hence at a given moment, mother’s education and household wealth might not explain much of the inequality observed in current caloric intake, but they seem to account for a larger share of the inequality in the cumulative, long-run nutritional condition of the children in all the countries.

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0.25

0.2

0.15

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0 Dominican Republic

Colombia

Height-for-age z-score

fig. 2.10

Bolivia Weight-for-age z-score

Nicaragua

Peru

Weight for height for age

Opportunity share of inequality in nutritional status. Source: Authors.

These findings suggest that “inherited” disadvantage of the kind associated with these observed background circumstances is not a good predictor of exposure to short-term deprivation in caloric intake. Long-term, cumulative differences in nutrition show up, however, in the differences in height for age. Children with inferior initial opportunity sets most likely do not enjoy the same level of nutrition in their daily diet. The hypothesis that the most disadvantaged children might not be enjoying proper nutrition and medical care is supported by the difference in height being more strongly explained by the observed circumstances. Proper nutrition at this age is essential not only for development of the body but also for development of cognitive abilities. Our findings suggest that differences in social and family background are partly to blame for differences in cognitive ability as well. The partial effects of each of the observed circumstances are presented in figure 2.11. Two of the variables seem to prevail in all countries: mother’s education and wealth. This is in line with the findings in most previous literature: most studies of child health—whether based on anthropometric measures, disease incidence, or reported health status—suggest that income or wealth and mother’s education are indeed the most important explanatory variables. The characteristics of the father follow as the next most important variable. However, the characteristics of the father tend to be strongly correlated with the mother’s education, and in most countries, the father’s occupation contributes very little to the understanding of overall inequality. This contrasts with the decompositions for educational achievement, where

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Bolivia

Mother's education 0.12

Mother's education 0.12

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Household members

Height-for-age z-score

Father's occupation

Weight-for-age z-score

Weight-for-height z-score

fig. 2.11 Partial effects of each circumstance on inequality of outcomes, selected countries. Source: Authors.

the father’s occupation had substantial individual salience, even when the mother’s education was controlled for. As figure 2.11 shows, no individual circumstance variable explains much of the inequality in weight-for-height z-scores, except possibly in the Dominican Republic. In general, the share of health inequality associated with nurture factors in Latin America appears to follow a different pattern than does, say, the

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opportunity share of inequality in education. In the health decompositions, there is a large variance in overall shares across the countries studied, while the relative importance of each explanatory variable is similar in all countries. This pattern is closer to that observed for the decompositions of inequality in economic well-being than to the one for education.

Conclusion Most studies of inequality in Latin America have emphasized inequality of outcomes, especially income and education. Although these are certainly important in themselves, we argue that more attention should be paid to that component of inequality that arises from unequal opportunities. Not only is this part of inequality more widely agreed to be entirely unjustifiable and unfair, but it can also compromise growth and development by wasting human potential and undermining the integrity of institutions. We find that the fraction of overall inequality associated with the existence of uneven circumstances in the region is significant, although it varies considerably across different outcomes. Although (a lower bound of ) 20 to 30 of inequality in earnings can be explained by unequal circumstances, this share can be as large as 50 for per capita consumption in some countries. Educational achievement is also affected by morally irrelevant, predetermined characteristics, which can account for around 15 to 20 of the overall variation in test scores. Even the health and nutritional status of very young children (measured by standard anthropometric indicators) is partly determined by family background. For instance, the (lower-bound) fraction of inequality in height-for-age z-score explained by circumstances varies from 7 to 22. Analyzing these different dimensions of welfare—economic well-being, education, and health—we find that the lower bound for inequality of opportunity seems to grow during the life cycle. Although in most countries only a small share of the overall inequality in early childhood nutritional status is attributable to differences in nurture, later in life a larger share of inequality in educational achievements is accounted for by unequal opportunities. An even larger share of the inequality in economic well-being is associated with differences in predetermined circumstances. In light of these results, it is tempting to speculate whether the “reproduction of inequality” occurs through a cumulative, multidimensional process whereby inequalities in different dimensions reinforce one another. Because good health facilitates learning, it is quite plausible that any inequality of opportunity in nutritional status will later be reflected in educational achievements as well. But health is not the only way in which differences in family and social background affect educational opportunities, so other channels of

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influence for circumstances are now added, and the share of unequal opportunity rises. These channels include, for instance, different degrees of exposure to cognitive stimuli at home, as well as different choices of (and prices for) preprimary and primary schools. In the same way, education is an important determinant of earnings, and it is natural that part of the inequality of opportunity faced in education, as well as health, will also show up in differences in earnings in adulthood. But now unequal circumstances at birth operate not only through early health differences and differences in school attainment, but also through additional mechanisms. Different circumstances help determine social networks, culture, and self-confidence (see, e.g., Hoff and Pandey 2006). These factors combine with different levels of accumulated human capital and play a role in job matches and remuneration rates. Finally, as discussed in the section on inequality of economic opportunity, inequality of opportunity seems to account for an even larger share of lifetime living standards, or permanent income, as proxied by household per capita consumption expenditures. The hypothesis would be that this could be related to circumstances affecting not only a person’s health and educational achievement, and not only his or her social network and job-market success, but also his or her choice of partner and family composition, as well as his or her other sources of income. Family background, measured through parents’ education and father’s occupation, is particularly important in understanding overall inequality in most of the outcomes discussed above. However, its role varies considerably, both across outcomes and across countries. The role of parents’ education and father’s occupation is likely to depend, at least in part, on how these variables are correlated with family wealth during a person’s childhood. In our analysis of inequality in children’s nutritional status, wealth seems to be undoubtedly the most important component in explaining the level of inequality of opportunity, while the other family background characteristics have very little explanatory power. It is possible that the inclusion of wealth during childhood and adolescence in the analysis of education and economic well-being might have the same effect. This remains a question for future research. Another point highlighted in this chapter is that overall outcome inequality and inequality of opportunity are not perfectly correlated. In the case of earnings, for instance, the rank correlation is less than one-third. This means that individuals in countries with the largest overall inequality do not necessarily face the most unequal opportunities, despite the fact that inequality of opportunity is both a cause of final inequality in outcomes and, as we measure it, a statistical component of it. Although the two concepts are thus evidently related, the imperfection in the correlations suggests that they are indeed intrinsically different. If one is more interested in one than in the other, then it makes sense to investigate them separately. In par ticu lar, if

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the policy objective is not so much to combat any form of inequality in a particu lar outcome (say, income per capita) as it is to eliminate its most noxious manifestation, then measuring inequality of opportunity separately may be essential. Similarly, it may be useful for policy makers to investigate which social groups suffer from the greatest opportunity deprivation and to compare that profi le with a standard poverty profi le (see Ferreira and Gignoux 2008). In closing, it is important to bear in mind that this is a recent area of study and that virtually every finding discussed here needs to be explored further. For instance, the lack of good data to measure family circumstances in Latin America has been one of the main constraints on analyzing inequality of opportunity in the region. In particular, little is known about the evolution of the opportunity share of inequality over time. Greater availability of panel or even repeated cross-sectional data with the relevant variables would be essential to shed light on these dynamics. Thematically, relatively little is known about health inequality in the region, especially with respect to inequality of opportunity. Given the evidence that health is an important determinant not only of schooling attainment but also of wages (e.g., Currie and Madrian 1999), it is likely to be an important dimension for understanding overall inequality of welfare. We have provided a first attempt at investigating this issue here, but much more needs to be done.

Appendix As mentioned in the section on measuring inequality of opportunity, inequality of opportunity might be measured by quantifying by how much F(y | C) differs from F(y). The first approach proposed in the literature was to measure inequality of opportunity by grouping individuals according to their similar circumstances: individuals with identical circumstances form a type. In this way, one may perform between- and within-group inequality analysis. The within-group component is associated with efforts because inside each type individuals face the same circumstances, and the between-group share is related to opportunities. This is the basic intuition behind the methods proposed by Lefranc, Pistolesi, and Trannoy (2008) and Checchi and Peragine (2010). In the sections on inequality of economic opportunity and inequality of educational opportunity, some of the results presented follow Checchi and Peragine’s method and are called nonparametric estimates. A parametric version of the same basic idea was proposed by Bourguignon, Ferreira, and Menéndez (2007). Their approach is to estimate (parametrically) the reduced form of the system (1) considered in this chapter and then to simulate the outcome individuals would get in a counterfactual scenario where everybody shared the same circumstances, that is, y∼ i = f ( C , g ( C , v i), u i) .

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In this way, it is possible to assess what share of overall inequality is due to inequality of opportunity by comparing the simulated and the actual distributions. As formally shown by Ferreira and Gignoux (forthcoming), these approaches are variants of the same basic idea: to decompose the total observed outcome inequality into an amount due to unequal opportunity and a residual component. A measure of the opportunity share of inequality will thus generally be of the form ΘI ^" y∼ ,h =

I ^" y∼ ,h . I ^" y ,h

(2)

In equation (2), I denotes an inequality index; {y} denotes the original, observed distribution of outcome y; and {yu } denotes a counterfactual distribution that is obtained from the original distribution by eliminating all inequality among people who share identical circumstances. I ({yu }) thus captures only inequality that is associated with differences in circumstances, but no inequality among people that share the same circumstances. In a standard inequality-decomposition framework, I ({yu }) corresponds to the betweengroup component of inequality, where, in this case, the partition of the population is defined by all circumstance variables. Two caveats are in order. First, because not all relevant circumstances can possibly be observed in the data, this decomposition approach estimates a lower bound for the opportunity share of inequality. Including additional circumstances (or a finer partition of those already observed) would lead to a finer partition of the population and possibly to a larger (and certainly no smaller) share of between-group inequality—that is, to a larger opportunity share. Another caveat is that these variants of the “top-down” approach will not always yield exactly the same result; estimates of the opportunity share of total inequality will in general depend on the specific inequality index I that is decomposed. Even for a given index, results might differ depending on the “path” of the decomposition: whether the procedure involves first eliminating the within-group inequality by “smoothing” the distribution or eliminating the between-group inequality by “standardizing” it. The only exception to path dependence (among measures that satisfy the Pigou-Dalton transfer principle) is for decompositions of the Theil-L (or mean log deviation) index. This result is entirely due to the properties of this particular index, which is both decomposable and path independent (Foster and Shneyerov 2000). The parametric alternative yields a different estimate even in this case because it imposes functional form assumptions. However, it has the advantage that it uses data more efficiently and may, in fact, yield a more reliable estimate for small sample sizes. In most practical applications to date, parametric and nonparametric estimates of this approach for the Theil-L have generated robust results. See Ferreira and Gignoux (forthcoming) for a discussion.

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Notes 1. See de Ferranti et al. (2003). 2. The phrase is by Cohen (1989). But see also Arneson (1989); Dworkin (1981a, 1981b); and Roemer (1996, 1998). 3. A third category of sources of inequality is “luck,” or random shocks. See Lefranc, Pistolesi, and Trannoy (2009) for a thoughtful discussion of different kinds of luck and how they relate to opportunity. Here, as in most of the empirical literature, we will group luck together with efforts in a general-purpose, “nonopportunity” residual. 4. See, e.g., van de Gaer, Schokkaert, and Martinez (2001); Bourguignon, Ferreira, and Menéndez (2007); Checchi and Peragine (2010); and Lefranc, Pistolesi, and Trannoy (2008). 5. See Bourguignon, Ferreira, and Menéndez (2007). 6. The use of the per capita normalization, as opposed to some alternative equivalence scale, ignores the issues of adult equivalence and economies of scale within households. The sensitivity of our measures of inequality of opportunity to adjustments for these issues is briefly discussed in Ferreira and Gignoux (forthcoming). 7. The samples used in Ferreira and Gignoux (2008) for the earnings analysis are restricted to adults aged 30 to 49 in order to control for cohort and life-cycle effects. Therefore, the inequality indexes reported are not representative of any country as a whole. 8. The parsimony in subdividing variables such as father’s occupation into relatively few categories is motivated by the need to keep the number of cells in the partition relatively manageable for the nonparametric decomposition. We return to this issue later. 9. Parametric estimates are always a little lower than nonparametric estimates, a feature that Ferreira and Gignoux (2008) attribute to an overestimate of between-group inequality in the nonparametric procedure because of the large sampling variance around the means of cells with few observations. 10. It is important to note that the results for Colombia and Peru are not directly comparable with the results for the other countries because in both countries there was no information about father’s occupation. A higher share of inequality of opportunity would likely have been observed in these countries if father’s occupation had been taken into account. 11. Comparisons between Brazil and other countries in this sample should be made with the caveat that the Brazilian data are from the mid-1990s, while those for the other countries fall in the 2000–2006 interval. Brazilian income inequality has actually been declining since 1996 (see Barros, Carvalho, and Franco 2007; and Ferreira, Leite, and Litchfield 2008), and it is possible that this decline is partly due to a reduction in inequality of opportunity. In fact, looking at a slightly earlier period (1988–96), Cogneau and Gignoux (2009) fi nd a decreasing trend in the fraction of the inequality in hourly earnings explained by circumstances in Brazil. 12. Brazil was not included in this part of Ferreira and Gignoux’s analysis because the PNAD (Pesquisa Nacional por Amostra de Domicílios) survey does not include questions on consumption. 13. For the partial effects of each circumstance to be interpreted causally, we must assume that any unobserved circumstances that are omitted from the regression are uncorrelated with the observed variables. This assumption is not necessary for the lower-bound interpretation of the overall opportunity share, but it is needed to interpret the individual coefficients as causal. 14. To preserve mean invariance of each index, we follow Ferreira and Gignoux (2007) in using the generalized entropy index E(2), which is half the square of the coefficient of variation. 15. Using the generalized entropy index E(2), as mentioned in note 14. 16. See, e.g., Pritchett and Summers (1996); Deaton (2004); and Becker, Philipson, and Soares (2005). 17. For more details on inequality in health, see Wagstaff and van Doorslaer (2000) and Deaton (2003). 18. Gender is obviously genetically determined. Z-scores are adjusted for gender differences by construction, so that the appropriate dependent variable captures variation above and beyond the genetic variation observed in a healthy reference population. 19. For a more comprehensive discussion of the adequacy of height as a proxy for health for young children, see Pradhan, Sahn, and Younger (2003). 20. Because the focus of the Demographic and Health Surveys is women at reproductive age and children, the data for several countries do not include information about fathers. Information about the father was therefore imputed from questions about the mother’s partner.

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21. The coefficient of variation is not used because z-score distributions have negative means in most developing countries. Although the variance is scale variant, note that the ratio of betweengroup variance to total variance, which is our measure of the nurture share of health inequality, is scale and translation invariant. The variance is known to be fully decomposable, and the properties of its ratio make it the preferred choice of index for this subsection. 22. Although in the previous sections we reported both parametric and nonparametric estimates, given the number of partitions in the analysis of health, it is more appropriate to use only parametric estimates in this case. 23. The intermediate position of weight-for-age z-scores in figure 2.10 is as expected because the best measure of short-term caloric intake is weight for height. Thus the additional share of variation in weight for age relative to weight for height is likely to reflect the larger variation in height for age across the groupings. 24. Case and Paxson (2008). 25. Place of birth was not included in figure 2.11 because if we eliminate the variance in the place of birth, the overall inequality in nutritional status increases. Th is is likely due to the fact that the impact of place of birth is negatively correlated to the effect of some of the other variables, like wealth and mother’s education (which have strong explanatory power). 26. Th is is similar to what was shown in Case, Lubotsky, and Paxson (2002). 27. Barros et al. (2009) refer to this basic idea as the “top-down” approach to measuring inequality of opportunity. In addition to this approach, Barros et al. (2009) also report results from what they call a “bottom-up” approach, which directly quantifies differences in the distribution of access to different ser vices and endowments across groups with different circumstances. See also Barros, Carvalho, and Franco (2007). 28. In the parametric method, including additional circumstance variables possibly would lead to a lower (and certainly no higher) variance of the residual term, and thus possibly to a higher (and certainly no lower) share of the overall variation accounted for by circumstances. See Ferreira and Gignoux (forthcoming).

References Albernaz, Ângela, Francisco H. G. Ferreira, and Creso Franco. 2002. “Qualidade e eqüidade no ensino fundamental Brasileiro.” Pesquisa e Planejamento Econômico 32 (3): 453–76. Arneson, Richard J. 1989. “Equality of Opportunity for Welfare.” Philosophical Studies 56:77–93. Barros, Ricardo Paes de, Mirela Carvalho, and Samuel Franco. 2007. “Preliminary Notes on the Measurement of Socially-Determined Inequality of Opportunity When the Outcome Is Discrete.” Unpublished manuscript, Instituto de Pesquisa Econômica Aplicada, Rio de Janeiro. Barros, Ricardo Paes de, Francisco H. G. Ferreira, José R. Molinas Vega, and Jaime Saavedra Chanduvi. 2009. Mea suring Inequality of Opportunities in Latin America and the Caribbean. Washington, D.C.: The World Bank. Becker, Gary S., Tomas J. Philipson, and Rodrigo R. Soares. 2005. “The Quantity and Quality of Life and the Evolution of World Inequality.” American Economic Review 95 (1): 277–91. Bourguignon, François, Francisco Ferreira, and Marta Menéndez. 2007. “Inequal ity of Opportunity in Brazil.” Review of Income and Wealth 53 (4): 585–618. Bourguignon, François, Francisco Ferreira, and Michael Walton. 2007. “Equity, Efficiency, and Inequality Traps: A Research Agenda.” Journal of Economic Inequality 5 (2): 235–56. Case, Anne, Darren Lubotsky, and Christina Paxson. 2002. “Economic Status and Health in Childhood: The Origins of the Gradient.” American Economic Review 92 (5): 1308–34.

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Case, Anne, and Christina Paxson. 2008. “Stature and Status: Height, Ability, and Labor Market Outcomes.” Journal of Political Economy 116 (3): 499–532. Checchi, Daniele, and Vito Peragine. 2010. “Inequality of Opportunity in Italy.” Journal of Economic Inequality 8 (4): 429–50. Cogneau, Denis, and Jérémie Gignoux. 2009. “Earnings Inequalities and Educational Mobility in Brazil over Two Decades.” In Poverty, Inequality, and Policy in Latin America, edited by Stephan Klasen and Felicitas Nowak-Lehmann, 47–84. Cambridge: MIT Press. Cohen, Gerald A. 1989. “On the Currency of Egalitarian Justice.” Ethics 99 (4): 906–44. Currie, Janet, and Brigitte C. Madrian. 1999. “Health, Health Insurance, and the Labor Market.” In Handbook of Labor Economics, vol. 3, edited by Orley C. Ashenfelter and David Card, 3309–3416. Amsterdam: Elsevier Science. Deaton, Angus. 2003. “Health, Inequality, and Economic Development.” Journal of Economic Literature 41 (1): 113–58. ———. 2004. “Health in an Age of Globalization.” Brookings Trade Forum 2004: 83–130. De Ferranti, David, Guillermo E. Perry, Francisco H. G. Ferreira, Michael Walton, David Coady, Wendy Cunningham, Leonardo Gasparini, et al. 2003. Inequality in Latin America and the Caribbean: Breaking with History? Washington, D.C.: World Bank. Dworkin, Ronald. 1981a. “What Is Equality? Part 1: Equality of Welfare.” Philosophy and Public Affairs 10 (3): 185–246. ———. 1981b. “What Is Equality? Part 2: Equality of Resources.” Philosophy and Public Affairs 10 (4): 283–345. Ferreira, Francisco H. G., and Jérémie Gignoux. 2007. “Toward an Understanding of Socially-Inherited Inequalities in Educational Achievement: Evidence from Latin America and the OECD.” Unpublished manuscript. Washington, D.C: World Bank. ———. 2008. “The Mea surement of Inequal ity of Opportunity: Theory and an Application to Latin America.” World Bank Policy Research Working Paper 4659, World Bank, Washington, D.C. ———. Forthcoming. “The Measurement of Inequality of Opportunity: Theory and an Application to Latin America.” Review of Income and Wealth. Ferreira, Francisco H. G., Phillippe Leite, and Julie Litchfield. 2008. “The Rise and Fall of Brazilian Inequality: 1981–2004.” Macroeconomic Dynamics 12 (S2): 199–230. Foster, J., and A. Shneyerov. 2000. “Path-Independent Inequality Measures.” Journal of Economic Theory 91 (2): 199–222. Hanushek, Eric A., and Ludger Woessmann. 2007. “The Role of Education Quality for Economic Growth.” World Bank Policy Research Working Paper 4122, World Bank, Washington, D.C. Hoff, Karla, and Priyanka Pandey. 2006. “Discrimination, Social Identity, and Durable Inequalities.” American Economic Review 96 (2): 206–11. Lefranc, Arnaud, Nicolas Pistolesi, and Alain Trannoy. 2008. “Inequality of Opportunities vs. Inequality of Outcomes: Are Western Societies All Alike?” Review of Income and Wealth 54 (4): 513–46. ———. 2009. “Equality of Opportunity and Luck: Defi nitions and Testable Conditions, with an Application to Income in France.” Journal of Public Economics 93 (11–12): 1189–207. Mizala, Alejandra, Pilar Romaguera, and Miguel Urquiola. 2007. “Socioeconomic Status or Noise? Tradeoffs in the Generation of School Quality Information.” Journal of Development Economics 84 (1): 61–75. Pradhan, Menno, David E. Sahn, and Stephen D. Younger. 2003. “Decomposing World Health Inequality.” Journal of Health Economics 22 (2): 271–93.

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Pritchett, Lant, and Lawrence H. Summers. 1996. “Wealthier Is Healthier.” Journal of Human Resources 31 (4): 841–68. Roemer, John E. 1996. Theories of Distributive Justice. Cambridge: Harvard University Press. ———. 1998. Equality of Opportunity. Cambridge: Harvard University Press. Van de Gaer, Dirk, Erik Schokkaert, and Michel Martinez. 2001. “Three Meanings of Intergenerational Mobility.” Economica 68 (272): 519–37. Wagstaff, Adam, and Eddy van Doorslaer. 2000. “Income Inequality and Health: What Does the Literature Tell Us?” Annual Review of Public Health 21: 543–67. Waltenberg, Fabio. 2007. “Normative and Quantitative Analysis of Educational Inequalities, with Reference to Brazil.” PhD diss., Economics Department, UCLouvain, no. 527/2007. Louvain-la-Neuve, Belgium: Presses Universitaires de Louvain. WHO Working Group. 1986. “Use and Interpretation of Anthropometric Indicators of Nutritional Status.” Bulletin of the World Health Organization 64 (6): 929–41. World Bank. 2005. World Development Report 2006: Equity and Development. Washington, D.C.: World Bank.

3

Elite Perceptions of Poverty and Inequality in Brazil Elisa P. Reis

Introduction At the beginning of the 1990s, when redemocratization was in its early stages in Brazil, I was a member of a research team investigating the views of the Brazilian elite about democracy. A survey we conducted then revealed that for a significant proportion of those in key positions in the country, poverty, inequality, and low scores on basic social indexes constituted major threats to the incipient democracy. As the years passed, Brazil made significant progress in institutionalizing democratic political institutions, but there were no equivalent gains in poverty reduction, nor did inequality levels diminish. Can we thus leap to the conclusion that we have clear evidence that democracy is not related to socioeconomic variables? Instead of accepting this simple argument, I align myself with the growing number of researchers who insist that poor social performance has prevented Brazil from deepening the democratization process (O’Donnell, Cullell, and Iazzetta 2004). Whereas in the early democratizing period, many analysts, eager to register the progress made at the political institutional level, neglected the social obstacles to democracy, nowadays, awareness of the existence of a large social deficit affecting the quality of democracy is much more widespread, as is growing concern among social scientists that reducing poverty is a necessary condition to give full meaning to citizenship. The fact that large masses of people throughout Latin America do not have full access to citizenship makes the Brazilian case an illustration of the The research projects on which this chapter is based were made possible thanks to funds provided by Brazil’s National Council for Scientific and Technological Development, the Foundation for Research Promotion of Rio de Janeiro State, and the North-South Center of the University of Miami.

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vicissitudes of democracy one observes across the continent. The respective social and economic indicators reveal that for most of these countries, there has been no or only modest success in fighting poverty. Even less noticeable is the progress of equality, and Latin America has remained more unequal than any other world region (World Bank 2006). Why do those who control strategic resources, whether material or symbolic, not take action to reduce poverty and inequality, even if they emulate democratic values and do believe that a larger social deficit can hamper democracy? This sort of puzzlement has led me to carry out further research on the matter, looking specifically at elite perceptions of poverty and inequality through in-depth interviews in selected areas of Brazil (Reis 2005, 2006). My study is an examination of perceptions of poverty and inequality among nonpoor people, not an investigation into the magnitude and profile of such problems. Moreover, it is about the perceptions of a tiny fraction of Brazilian society, the very few who occupy leading positions and control highly valuable resources. In this chapter, I use material from survey research, as well as qualitative data on the Brazilian elite, to discuss how those who hold top positions in the country perceive poverty and inequality, and I aim to summarize information that might be useful to identify policy opportunities. It is my contention that by discussing the case of Brazil, we may contribute to a better understanding of the conditions for improving the quality of its democracy. Moreover, I am also hopeful that this understanding might contribute to enhancement of citizenship throughout the continent. I first argue for the role of cultural variables in poverty and inequality research. That section also discusses why the views of the nonpoor, particularly of those who occupy leadership positions, have to be taken into consideration if we want to reduce poverty and inequality. Next, I draw on survey data, published opinions, and in-depth interviews with members of the elite in Brazil to look at how they conceive of poverty, whom they blame for it, and what they think should and could be done to improve the lot of the destitute. In the concluding section, I draw attention to the need to know more about perceptions of poverty and inequality in order to increase our knowledge about what may contribute to expansion of the political community.

Poverty and Inequality as Cultural Variables My decision to look at perceptions of poverty and inequality was motivated by the observation that research on social deprivation and/or distribution problems does not pay enough attention to cultural issues. Much more frequent is the focus on socioeconomic indicators and/or the nature and consequences of actual social policies. We do count on important opinion studies,

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but less attention is paid to basic cognitions, beliefs, and values about what is fair and just. However, these are the key elements affecting awareness of poverty, degrees of tolerance of inequality, openness to redistribution, and similar factors that are crucial to the success or failure of antipoverty measures. At the outset, it is important to bear in mind that when we are discussing inequality, we are also discussing its opposite. Equality and inequality are relational notions, and therefore we cannot discuss one without addressing the other. Moreover, these concepts necessarily presuppose the idea of a unity, a whole, or a community of sorts, within which goods and ser vices are distributed. What define whether a given pattern of distribution or a proposal for changing it is legitimate or illegitimate are the values and beliefs to which a political community adheres. Therefore, norms and values about what is acceptable or not with regard to the way resources are distributed in a given society are central to research on social inequality. The political community is the most immediate reference when one thinks of distributive justice. As Walzer points out, membership in the community is relevant because it brings to the fore what members of a community owe to one another. The first thing they owe each other, he goes on, is the provision of security and well-being. It is in this framework that the notion of distributive justice makes sense. Resources are distributed within certain limits that defi ne a community. In his words, “Mutual provisions breed mutuality, and common life is simultaneously the prerequisite of provision and one of its products” (Walzer 1983, 65). In the contemporary world, we need the notion of a political community in order to view inequality as something distinct from difference. It is within the scope of shared meanings, that is, in the world of culture, that inequality gains significance as the opposite of equality. From a historical perspective, we observe that it is in the value context of modern culture that equality has become cherished. Conversely, it is only then that the traditional notion of differences, perceived as natural properties imprinted in castes, social orders, or status groups by nonhuman deeds, has lost validity (Dumont 1977, 1983). Taking for granted that every human being is an individual, the modern individualist ideology has fostered the quest for equality as a legitimate value. However, although individualism has been extremely powerful in the sense that it has acted to denaturalize secular notions of social difference, individualism certainly has not found univocal correspondence in distribution processes. Indeed, through long-term political disputes, it has contributed to making it possible to enforce equality of opportunities and even equality of conditions through the adoption of positive discrimination in order to compensate historically deprived sectors of a political community. Within nonliberal contexts, the quest for equality substituted authority mechanisms of distribution for individual rights, aiming at equality of results.

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But the three types of equality just mentioned (of opportunity, of conditions, and of results) are just ideal model types, generalizations that do not describe the real world. When we look at actual societies, we observe, first, that what is common to all of them is the fact that equality constitutes an ideal, a normative concern, not a given empirical feature. It is an expansive ideal for which modern societies strive. The second general observation is that even within each of the three models, there is space for significant variations in the definition of equality. This is precisely what makes attention to culture, and particularly to the political aspects of culture, relevant to our subject. Concepts of justice and equality are basic ingredients of a political culture (Verba and Orren 1985). If we ask the key question “Equality of what?” within a particular culture, we have to inquire into that culture’s prevailing values and beliefs, but the shortcut to a clear answer, as Rae observed, is what is taken as acceptable in policy terms (Rae 1989). In his words, there is no equality but equalities because these are necessarily complex, relative, and contingent. He adds that the success of one idea of equality over others will always be defined by its translation into policies, not at the discursive level. To identify what definition of equality is being used, one must look at the policy mechanisms socially perceived as adequate to correct distortions of equality. Furthermore, socially accepted notions of justice and fairness are what justify policy measures and make them legitimate and viable. In other words, it is at the cultural levels that one must look to inquire into the viability of particular policy initiatives to combat poverty and to reduce inequality. Given the preceding discussion, it is surprising how little effort has been made to connect research on social values and beliefs to mainstream analysis of distributive issues, social policy evaluations, and related studies. Most of the time, if culture is addressed at all in poverty research, investigators inquire into the perspective of the poor, how they cope with their hardship, how poverty affects their chances in life, and how they explain their underprivileged conditions. Although these inquiries lead to very valuable information, it is not sufficient. One needs to know more about those who are not poor but live under the same laws, customs, norms, and government regulations even though the way distinct social sectors experience such commonalities varies considerably, as is well known. Some criticize the focus on culture as too static and/or conservative to the extent that it looks at characteristics that define persistent ways of being, and they take as nonproblematic the hegemonic values and beliefs of domineering groups. Thus, for example, the pioneering studies of Oscar Lewis in the 1950s and 1960s of the culture of poverty were strongly criticized for what was interpreted as the author’s implicit view of the poor as fatalistic, unable to react against the status quo (Lewis 1959, 1966). Also, recurring criticisms were

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targeted at studies of the political culture of particular nations (e.g., the famous book edited by Verba and Almond [1963]), which were usually accused of ethnocentrism, elitism, and/or conservative biases. In more recent decades, the cultural turn that has taken place in the social sciences has brought a much more sophisticated view of the relationships among culture, institutions, and structures, and many of the earlier criticisms of the focus on culture have been dismissed. Instead of taking culture and structure as alternative independent variables, more and more social theorists see culture itself as structured practices and ideas. Along these lines, taking into account the dynamic character of culture, cultural sociology distinguishes itself from sociology of culture precisely by recognizing that cultural variables are constitutive components of any social object (Alexander 2003; Münch 1992; Swindler 1986). In fact, even in classical social theory, one finds elements that incorporate cultural factors as variables instead of given essences. Thus, for example, Tocqueville (1988) saw a dynamic interaction between prevailing values, concrete circumstances, and policy initiatives. He perceived successful reforms as the result of realistic assessments of cultural and material conditions that, in the long run, end up changing basic values and beliefs. In other words, what makes for the viability of changes in his perspective is an objective assessment of the available material conditions, plus the subjective dispositions defined by shared values and beliefs. In turn, he believed that in the long run, successful institutional transformation would change deep-seated ways of being, thus closing the circle of interdependence among values, material conditions, and policy decisions. Apart from the neglect of cultural variables, poverty research is marked by another bias: looking at the issue as one that has implications only for the poor. Studies that take into account the negative externalities that social deprivation may have for the larger society are not popu lar. But the neglect of the interdependence inherent in inequality is a serious analytical shortcoming. The poor and the nonpoor are interdependent, and to think of one group without the other severely limits our knowledge of the prospects for change. Because no attention is paid to the implications of poverty for the nonpoor, specialists tend to ignore the fact that perceptions of the better-off are very important in devising redistribution policies. Although scholars are well aware that most societal situations are not zero-sum games, they either implicitly or explicitly assume that only the poor could benefit from antipoverty initiatives. Even rarer are analyses of poverty and inequality from the perspective of the elite. Poverty research all over the globe has focused on the poor as if they lived in a world apart from the nonpoor. In the literature, one does not find insights into the way in which those who are not poor imagine the life of the poor and its consequences for society at large. The usual assumption is

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that those in top positions care only about the maintenance of the status quo that favors them. But even if this presupposition proved to be true, it would be necessary to explain how the elite act to prevent change, and what sort of arguments they use to justify a distribution pattern. Because members of the elite are in a privileged position to control material and symbolic resources, finding out about their cognitive and normative views of poverty and inequality is a strategic means to identify what conditions would lead this sector of the nonpoor to support antipoverty measures and make them less entrenched in their privileges. It is also important to bear in mind that in choosing this analytical angle, one is not led to play down the initiatives of the poor themselves. The presupposition it entails is just that in controlling strategic resources, the elite may act preventively or reactively to initiatives, or lack thereof, from the poor themselves. Because the elite occupy strategic positions and control material and symbolic resources, it is very important to investigate what notion of equality they sustain, how they justify a given pattern of distribution, how they explain poverty, and what they believe should and could be done to reduce it. Such cognitive and normative perceptions inform us about the limits to social policy in a given society. This does not mean that only the elite can initiate or deter policy initiatives. That they also react to pressures coming from outside their circle or simply feel the need to act before being pressured to take action is obvious. To refuse to look at the elite, as do many scholars concerned about poverty and inequality, can actually be a severe underestimation of the capacity of pressure from below. Moved by the arguments that justify the relevance of the cultural perspective and the focus on those in top social positions, I took inspiration from de Swaan’s analysis of the origins of the welfare state in Western Europe (de Swaan 1988). Although de Swaan explicitly recognizes the role played by ideal factors throughout the mobilization promoted by the ideologues, his analysis has the merit of indicating how elite interests may play an important role in antipoverty initiatives. Using convincing historical evidence, he offers an interpretation of how the welfare state emerged in Europe as the consequence of the collectivization of the elite’s reactions to what they came to perceive as threats posed by poverty. As de Swaan sees it, a set of conditions had to be present to move the elite to take antipoverty actions and eventually to delegate the initiative to the central authority. First, the elite had to be aware of social interdependence. More specifically, the elite had to identify negative poverty externalities that could take different forms: (1) risks of social disorder through rebellion or similar forms of revolt, (2) threats of contagious epidemic diseases, and (3) threats of a labor and/or soldier shortage as a result of mass emigration. Second, the elite had to experience some sense of responsibility with regard

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to the plight of the poor. Third, those in top positions needed to believe that something could be done to ameliorate the situation of the poor. In short, perceived threat, sense of responsibility, and sense of efficacy were the key elements prompting the elite to act to improve the lot of the poor. If these three conditions are present, then we can say, according to de Swaan’s perspective, that the elite display “social awareness,” something very different from goodwill. Rather, social awareness means that (1) the problem of poverty is perceived as one that creates negative externalities; (2) the elite believe that something can be done about it; and (3) the elite feel responsible for taking action. Next, he shows that problems of collective action gradually led the social elite to delegate action to state authority. In other words, the elite solved the classic problem of the free rider by transferring the responsibility for antipoverty measures to the actor who could employ coercive means to collect taxes in order to implement social policies. Taking into account that the Brazilian elite valued democracy and that they perceived social problems as threats to it, I felt tempted to inquire whether the conditions posed in de Swaan’s model were likely to be present among the Brazilian elite. Needless to say, the context of the elite I investigate is profoundly different from that of the European elites de Swaan analyzed. The European elites at that time were active builders of the ongoing nationstate process and therefore saw the state as part of themselves. In contrast, the historical process of state building in Brazil, which has been much more recent and has relied much more on authoritarian resources, has conferred on the elite very different characteristics. However, even if it is not possible to compare old-time European elites and contemporary ones in Brazil and other less developed countries, researching how the latter fare with regard to the conditions that de Swaan modeled may contribute to understanding the opportunities to affect distributive policies. What norms and values do the elite in Brazil sustain to justify or condemn persistent poverty and inequality? Whom do they tend to blame for the fate of the poor? Do they identify consequences of poverty for the nonpoor as well? What do they think should be done about the problem? Whom do they see as responsible for taking action against poverty? These are all crucial questions if one wants to inquire into the viability and effectiveness of specific social policies.

The Views of the Brazilian Elite As discussed in the previous section, I assume that the political culture of the elite provides relevant information for research on poverty and inequality. Instead of looking at elite behavior, I focus on their perceptions, inquiring

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into cognition and evaluation about poverty and inequality, both in their own society and in general terms. My observations are based on three sources of information on elite views. The first, a survey conducted in 1993–94, investigated a sample of 320 individuals occupying top positions in four basic areas: politics, public administration, business, and union activities. The project, titled “Democracy and Strategic Elites,” examined perceptions of people in leadership positions, asking about their assessments of the democratization process under way after twenty-one years under dictatorial rule. We inquired into their cognitions, values, and beliefs about democracy, social policy, inequality, and other basic political components of culture. Our criteria for selecting the samples varied across the four sectors. For the political elite, we sampled members of the Senate and Deputy Chamber. Administrators were selected from top positions in the federal administration and included bureaucrats as well as technocrats. We sampled the business elite from the list of chief executive officers of the country’s three hundred biggest companies. Finally, we selected union leaders from the union census conducted by the Brazilian Institute of Geography and Statistics in 1987. Later, motivated by the findings of this survey, I took up the challenge of looking at elite views through the use of qualitative data gathered through in-depth interviews. Instead of four large elite sectors, I opted for more segments of the elite by also including members of the judiciary, intellectuals and opinion formers, the military, police, and religious leaders. The selection criteria for elite members again were institutional; that is, people were selected because they occupied top positions in selected institutions. I also opted to interview elite members based in four different centers: Rio de Janeiro, São Paulo in the more affluent Center-South, and Salvador and Fortaleza in the impoverished Northeast. This second Brazilian study of elite perceptions through qualitative data was part of a larger project I coordinated that involved four other countries: Bangladesh, Haiti, the Philippines, and South Africa. The same sort of selection criteria and semistructured interviews took place in the five countries. Although no systematic comparisons were pursued, the nation studies revealed significant similarities and differences that helped us capture the ways those in top positions understood poverty, justified inequality, and sought to change or preserve the status quo. Finally, my third source of information consisted of press material written by elite members who published in the two major newspapers of each of the four cities selected for the realization of the in-depth interviews. In this case, the option was a random selection of material from issues printed in the previous five years.

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Naturally, comparability among the survey data, the data from the indepth interviews, and the press material is rather impressionistic. Even so, convergences and divergences made it possible to highlight single cases with insights from the others. In the case of Brazil, the use of different research strategies contributed to saturation of the information on the views of the elite. Moreover, having the survey results first made it possible to identify other relevant questions to be pursued through qualitative investigation, as well as further inquiry into ideas previously suggested. As I mentioned at the beginning, there is great concern about social issues among the Brazilian elite. They perceive poverty and inequality as very salient issues. Thus, for example, as the survey results shown in table 3.1 indicate, the low educational levels of the Brazilian population were the most frequently mentioned threat to democracy, followed closely by poverty and inequality. Again, as shown in table 3.2, when asked what were the country’s most serious problems, the elite chose health, education, and poverty as priorities, preceded only by inflation, rampant at the time. The salience of basic education as a preferred dimension in social policy also appears clearly in evaluations of the desirability and viability of selected policies, as indicated in table 3.3. Indeed, education constitutes the key factor to explain poverty and inequality in the view of the elite. If in the survey study one already observes that it ranks high among the explanations selected by the respondents, in the open interviews, as well as in the printed discourses, this becomes even more salient. Although the elite are greatly aware that there are many in the country Table 3.1 Major obstacles to democracy in Brazil according to the elite () Low educational level of the population High levels of poverty and social inequality Absence of party tradition Group and sector corporatism Incompetence of power incumbents Lack of party tradition Selfishness of the elite Political clientelism Concentration of power in the executive branch High inflation rates Impoverishment of the middle classes Prolonged economic recession Threat of military intervention Total

. . . . . . . . . . . . .  (n = )

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elite culture, framing, and public opinion Table 3.2 Major domestic problems in Brazil according to the elite () Inflation Education and health Poverty and inequality Governability Income distribution Other political factors Other economic factors Corruption Recession and unemployment Behavior of the elite Foreign dependence Moral crisis Other social factors Total

Table 3.3

. . . . . . . . . . . . .  (n = )

Viability and desirability of specific policies as perceived by the elite ()

Policies Free, universal basic education Housing programs for the poor Free health ser vice for all Early retirement* Unemployment insurance Food-distribution programs Free university education Minimum income for all above age  Old-age pension regardless of previous contribution

Viable and desirable

Desirable but not viable

Viable but not desirable

Neither viable nor desirable

Total

. . . . . . . .

. . . . . . . .

. . . . . . . .

. . . . . . . .

. . . . . . . .

.

.

.

.

.

Source: Elite survey, 1994. * Women and men after 30 and 35 years of ser vice, respectively, regardless of age.

who experience severe hardship, they mainly attribute this to deprivation of education. Consequently, the elite also identify education as the privileged angle of intervention to improve the lot of the poor. This is clear for all elite sectors considered and applies to the different localities under consideration. It is also obvious that behind this choice for education lies a clear preference for equality of opportunity over other notions of equality. The elite tend to see education as an instrument of social betterment that does not necessarily imply redistribution. Rather, the idea is that everyone can improve his or her social standing through the acquisition of educational

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resources that contribute to expansion of one’s chances in the labor market. Education is posed as the strategic means to promote individual and collective benefits without penalizing anyone: thanks to it, the poor can improve their lot and, at the same time, contribute to wealth expansion in the country. Also noticeable is the fact that for the great majority, education constitutes essentially human capital, not an instrument for empowerment. The assumption is that the gains it generates, both individually and collectively, take place because workers get higher wages, entrepreneurs count on better-qualified labor, and society benefits from expanded productivity. The qualitative evidence collected through semistructured interviews is overwhelming. Elite members engaged in long discourses to justify the priority of education, often invoking cases they knew as “proof” that the poor may climb up the social ladder by educating themselves. Often they compared case histories of two people among their subordinates to indicate that the one who was determined was able to explore educational opportunities, limited though they might be, to make progress, in contrast with the lazy or weak fellow who remained poor. In the words of one eminent politician: “When one is intelligent and determined, no doubt he or she can overcome poverty and move ahead. I have seen it so many times among my employees. Like this couple who used to work for me. She is clever and hard working. She went beyond elementary education, managed even to get university education and today has a decent salary. He instead is slow, lazy, almost illiterate.” Illustrative of many statements I heard, this quotation leaves no doubt: in the elite view, intelligence as a natural endowment, plus self-discipline, makes a difference in the life prospects of the poor. Beyond this, it is the responsibility of the state to provide educational opportunities for all. As members of a privileged social sector, most elite individuals in my sample would be willing to help personal acquaintances become educated. Here one fi nds a clear pattern: at the personal level it is acceptable to contribute in order to help a poor person improve his or her living conditions. In the illustrative words of a businesswoman: “If you ask me what could I do to help the poor, I would say that I can help my workers’ education, I can even join forces with other business leaders and establish a school to provide basic education, or perhaps support someone who shows potential to go beyond basic education. If you think someone has a future, he is intelligent, diligent, why not help him to attain university level? I think that is my role as a business leader.” But the elite unanimously reject the idea of paying more taxes to improve education. The standard comments I heard in this respect were the following: “I already pay too much tax.” “What is needed is more state accountability, not expanded budget.” “What is lacking is state determination to enforce education.”

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In short, there is a strong consensus that the combination of individual effort and opportunity makes education the ideal option to overcome poverty. Indeed, listening to the discourse of people from different sectors of the Brazilian elite, I was surprised to find how much convergence there is among them. As I read the recorded in-depth interviews, it became clear that if differences appear, they are basically limited to some expression of functional specialization, while beliefs and values are usually shared throughout the people sampled. Thus, for example, although a business leader was more enthusiastic than other kinds of elite members in praising the economic privatization Brazil experienced in the 1990s, his statement below could easily be replaced by many others I collected along the same lines.

While privatization constitutes a huge progress, the state still has a very important role to play, especially with regard to health, education, and public security. It is a shame that the state is not performing its role adequately. The major urban centers of the country experience an absurd situation because the state is not fulfilling its role. In my personal case, I would much prefer to live in a house, but I am forced to live in an apartment building because in a house I would not be safe. I would be more vulnerable to robbers and other criminals. . . . In this city, we live surrounded by a miserable periphery. Outside our islands of prosperity, it is poverty all over. People flee in great numbers from the impoverished rural areas to the large urban centers. The government should provide incentives for these people to stay in the countryside. . . . An efficient public policy to counteract rural migration is lacking. But it is also important to observe that the elite tend to see education not only as the most legitimate channel for individuals to escape poverty, but also as an efficient way to promote national progress. In the words of a member of the intellectual elite: “Education is our weak spot. This means we are a backward country because our labor force is unable to cope with new technologies. At all levels, we face this problem. We remain behind because we are unable to absorb technological innovation.” When questioned about affirmative action for minorities, elite people are often ready to state that equal opportunity is preferable to equal conditions. The most common argument is that specific policies to compensate black people for historical disadvantages would foster a racial identity that would be detrimental to generalized social solidarity. Asked why they think that there are almost no blacks in elite positions, the answer is again their low educational attainment. However, coherent with the preference for equality of opportunities is the dislike for affirmative action in general and for quota systems in particular.

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Although the elite unanimously admit the existence of color discrimination in Brazil, the great majority see positive discrimination with strong suspicion. The perception of color discrimination as something pervasive but also elusive is generalized among the elite. In this respect, the elite do not differ from the rest of the Brazilian population: no one sees himself or herself as having prejudices or exerting discrimination against blacks (Guimarães 2008; Telles 2006). Moreover, like the general public, the elite refer to the elusiveness of discrimination as a cultural asset. The discourse gives emphasis to the idea that because race relations in Brazil do not involve social polarization, the tensions that take place in other multiracial contexts find no place in the country. This same argument is used to evaluate affirmative action as an inadequate strategy that could hamper the typical Brazilian color conviviality. A banker summarizes well what the majority of the elite think about affi rmative action:

I would not favor a quota system. . . . It really worries me if two people compete for a position and one of them gets it because he or she belongs to a group that has been historically deprived. What troubles me is that the one who does not belong to the minority, but is well prepared, is paying the costs of the quota principle. Then, we are back to the old argument: education should be accessible to all. Maybe this is utopian, but I believe that irrespective of social origin, race, or persuasion, everybody should have access to the same sort of elementary education, without the differences we observe today in the quality of education. . . . If we were to enroll any child who shows talent and willingness, regardless of his or her family income or place of residence, in a private school where today we only find upper-middle-class children, inequality would gradually shrink. Ideally, the state should provide the means for enforcing this strategy. . . . In any case, we already have a social debt. There are already millions of young people who have not benefited by a good education, and who already experience many other forms of deprivation. So the only alternative left for them is state assistance. Although the elite discourse reveals less resistance to promotion of opportunities for women, the female share in elite positions seems almost as small as that of blacks. Women were completely absent in the random survey sample. The few intentionally selected for in-depth interviews were highly concentrated in the political sector. Although, as a rule, females have higher education levels in Brazil, they are disadvantaged with regard to top social positions. Political entrepreneurship, often initiated within union politics and in the educational sector, seems to be the major avenue to leadership positions for women.

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Major causes of poverty according to the elite ()

The state not fulfi lling its social function Lack of political will to fight poverty Elite’s lack of social sensitivity Insufficient economic development Economic recession The logic of capitalism Monopolization of opportunities Income concentration required for growth Lack of effort of the poor Total

. . . . . . . . . .

However, although the elite favor the liberal creed, prefer equality of opportunities to conditions or results, and prefer universal rights to affirmative action, the majority of the elite expect the state to provide the means to improve the lot of the poor. No sense of personal responsibility for the social conditions of the poor seems to be popular among the elite. When the elite were asked about the causes of poverty, the largest proportion of responses indicated that the state does not fulfill its social function. Lack of political will comes next, as shown in table 3.4. It was via the in-depth interviews that the meaning of such responses was revealed: what is stressed is that the state is not effectively committed to attacking the problem and does not have real will to tackle the issue. The previously mentioned widespread belief that education can be a costfree instrument to fight poverty is based on the idea that the state is responsible for providing financial resources necessary for an adequate supply of education. Also, when discussing other policy issues, the elite tend to see the state as the major actor responsible for solutions to inequality problems. As table 3.5 shows, government inefficiency and the state’s lack of will to act are by far the most frequently mentioned factors to explain why social policies fail. Their open discourse reinforces the conclusion that the Brazilian elite attribute responsibility for antipoverty initiatives to public power, whether it be the state, the government, or the authorities. Even when a member of the elite occupies a public function, no feeling of being in charge is expressed. Preference for state over societal initiative is also manifested when the elite are asked about the role of nongovernmental organizations (NGOs), philanthropic initiatives, and corporate social responsibility. The majority tend to look at these organizations with suspicion or to dismiss them as of little relevance, stating that such organizations perform only a marginal role. Many explicitly indicate that they are poor substitutes for a state that falls short of its duties and obligations. The way Brazilians in top positions evaluate civil society initiatives to counteract poverty contrasts sharply with perceptions of

Elite Perceptions of Poverty and In e qual ity in Brazil Table 3.5 elite ()

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Explanations for the failure of social policies according to the

Bad planning and execution Lack of political will/low priority Political and/or personal use of these policies Corruption Paternalism and/or the palliative nature of the policies Characteristics of the elite* Priority attributed by the state to other areas** Lack of resources*** Lack of participation of civil society Structural problems in the economy Lack of private participation in the execution of policies Other Total

. . . . . . . . . . . . . (n = )

* For example, egotism, lack of vision, authoritarianism. ** In other words, the state is considered to be excessively large and too involved in economic activities and thus drains human and capital resources from social areas. *** Th is item does not concern criticisms regarding the state’s activities, but rather the perception that resources are scarce to carry out the social policy agenda.

the same issue among other national elites who do not see the state as primarily responsible for fighting poverty. Thus, for example, one politician says: “We see today this flood of nongovernmental organizations. I even admit that NGOs have a role to play because not everything has to be state sponsored, right? But I strongly believe that the most strategic development activities, as well as basic social benefits, have to be state responsibility. The state has to remain in charge. The trend we observe today toward the transfer of functions traditionally performed by the state to the private sector is a dangerous fashion wave. It may just transfer resources from the public to the private sector without any guarantee that the latter will perform better.” Nevertheless, there is less consensus in the evaluation of civil society initiatives than in the case of the priority conferred to education. Elite actors who are directly involved in voluntary initiatives, whether these are philanthropy, civic action, or corporate social responsibility, express a very positive view of the partnerships between the state and civil society. Even if these “activist” members of the elite are a minority, they can perhaps provide some clue toward the identification of possible openings to expand a sense of social responsibility among those who control critical resources. What is the view of this minority? What prompts them to take initiatives? These are important questions for further research. Compared with the model presented by de Swaan, the Brazilian elite rank high in perceiving societal interdependence. They clearly emphasize that there are negative externalities of poverty and inequality, but what they see

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elite culture, framing, and public opinion Table 3.6 Worst consequences of poverty in large cities, as selected by the elite () Violence/crime/insecurity Dehumanization/social apartheid Risk of social conflict/chaos Declining quality of life Social misery Unemployment Vicious cycle of poverty Barriers to development Lack of housing/slumification Threat to democratic stability Encouragement of political opportunism Other Total

. . . . . . . . . . . . . (n = )

are threats to property and to personal security, not a collective threat. They identify private violence as the major consequence of poverty and particularly of inequality, and they believe that it afflicts the whole society, the poor and the nonpoor alike. As shown in table 3.6, threats to security and related issues are perceived as highly relevant consequences of poverty in large urban centers. Nevertheless, the elite do not feel responsible for taking action to improve matters. As already stressed, they blame the state for its inefficiency and lack of will to promote change and do not imagine themselves as possible actors on this front. In terms of the model proposed by de Swaan, they have a sense of interdependence, that is, they identify negative externalities of poverty; furthermore, they believe that something could be done if the state had the will and were to perform its social role; but they seem to lack a notion of responsibility and do not conceive of themselves as relevant actors on this front. For better or worse, one does not find huge variations in the elite’s perceptions across the various sectors examined. As already observed, their values and beliefs are highly consistent, and on many issues even the views of the union elite about poverty and inequality are not different from those of other elite sectors. But when asked about the most relevant initiatives to reduce poverty, some interesting variations deserve comment. Politicians, bureaucrats, businesspersons, and union leaders are coherent in their status role. It is essentially with respect to this question that union leaders differ significantly from the other groups and express distinctive preferences. What is somewhat surprising in table 3.7 is the converging preference of elite sectors for agrarian reform as a means to reduce poverty. Only the business sector differs from the others in the priority given to land reform. Qualitative data have made it possible to take a careful look at the motivations that fuel this preference or its rejection. As expected, business leaders do not see

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Table 3.7 Policy options to reduce poverty according to the elite

Policies Institute agrarian reform Increase efficiency of public social ser vices Control population growth Deregulate the economy Increase progressiveness of income tax Increase social expenditure Share profits with labor Tax wealth Total

Bureaucrats

Business leaders

Laborunion leaders

. .

. .

. .

. .

. . .

. . .

. . .

. . .

. . .

. . . .

. . . .

. . . .

. . . .

. . . .

Total sample

Politicians

. .

agrarian reform as a positive alternative because it makes a direct attack on private property. For the other sectors, one observes that the belief in agrarian reform is firmly grounded in the desire to reduce social problems in large urban centers. The idea of “sending the poor back to the countryside because they were less deprived there” remains a lively myth. Even if many of those who join the landless mobilization have never even lived there before, and if statistics prove that poverty is more acute in rural areas, the elite in contemporary Brazil are essentially urban and nostalgic for a time when the cleavage between rural and urban put less stress on the supply of public goods and ser vices in large urban centers. The target is to remove the poor from the urban centers by promoting land distribution as a social welfare initiative. Thus, for example, a union leader elaborates why he thinks agrarian reform should have priority among policies to counteract poverty: “Agrarian reform would be very effective in counteracting the influx of poor migrants who make up the majority of the informal sector in metropolitan areas. Agrarian reform could play a compensatory role. Land property is a way to create incentives for the poor to stay in the countryside. . . . It should play mainly a social, rather than an economic role.” Differences in the way the elite perceive poverty and inequality are also minor across regional lines. It is only with respect to the relationships between the market and the state that one observes different normative views among the northeastern elite and those in the more affluent Center-South. The former tend to evaluate the move toward economic liberalism that has taken place in recent decades very positively. They praise global markets for the opportunities opened to exploit local cheap labor, pointing out that the resulting prosperity will contribute to the reduction of poverty. In contrast, in the Center-South, among those sectors of the elite who are descended from

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the old industrial bourgeoisie, there is nostalgia for the old days of import substitution protected by state regulation. They blame globalization for increased poverty and inequality and clamor for the restoration of a national development project. In the end, both regional elites espouse the economicist view, betting on the trickle-down effects of growth. They differ, however, in their conceptions of the role of the state in the market.

Conclusions My ultimate aim was to stress the relevance of cultural variables in conducting research on poverty and inequality, so as to contribute to the understanding of the prospects for successful social policies and well-grounded democracy in Brazil and elsewhere. Taking for granted that poverty and inequality affect the quality of democracy, I inquired into the values and beliefs of people occupying top positions in several sectors of the Brazilian social structure. In every society, institutionalized patterns of distribution constitute the object of rationalization. If we want to alter the status quo through efficient social policies, we must investigate the arguments that justify why poverty exists and why inequalities are socially accepted. This is not to say that there is an immediate connection between deciphering cultural values and beliefs and finding ready-made policy solutions. What I suggest is just that the findings about the political culture of those in command of valued resources may contribute to the formulation of antipoverty policies that take into account what is more likely to appeal to (or to alarm less) the elite. In thinking about the prospects for improving the quality of democracy in Latin America, it is very important, for example, to take into account the perceptions of the elite about the state. If the elite see the state as responsible for taking action against poverty but also perceive this actor as incompetent and lacking will to take action, what should be the strategy of policy makers to win their confidence and make them interested partners in promoting social change? We have seen that the elite are deeply aware of the interdependence between the poor and the nonpoor. We also have seen that threats to physical security and property constitute very salient problems for the elite. Focusing on visible progress in public security could be an important strategy to give the elite a feeling of state efficacy that, in turn, could help strengthen the weak belief in collective solutions to security problems. Effective public investment along this line could also have a positive impact on reconstructing the political community. We have seen that despite awareness of the negative consequences of poverty and inequality for the nonpoor, the Brazilian elite do not feel responsible for these problems, even when they are in government. We need to know more about this attitude in order to better understand the prospects

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for expanded social commitment. Further research on the culture of the elite could, for example, tell us where those who control strategic societal resources draw the line between “us” and “them.” The elite control resources that can be put to use either to perpetuate or to fight poverty. We know that the ways they conceive of poverty and inequality have a powerful impact on societal action or inaction vis-à-vis poverty. Regrettably, policy officers, on the one hand, and social activists, on the other, have not paid much attention to the political parameters that make specific social policies viable. While technocrats bet on technical skills, activists tend to overestimate moral determination. These two components, knowledge and voluntarism, are necessary but not sufficient to make antipoverty initiatives effective. It is also critical to take into account the cultural environment where policies are implemented. Learning about the political culture of those who control material and symbolic resources is an important step in mapping when, how, and why social policies to fight poverty come to be perceived as possible, necessary, and/or desirable.

Notes 1. For an example of criticism of Lewis’s works, see Goode and Eames (1966). More recently, this tradition was somewhat revived with the publication of the World Bank report Voices of the Poor (Narayan et al. 2000). 2. Exceptions here are Verba and Orren (1985) and Verba et al. (1987). 3. Th is view contrasts sharply with the way the elite perceive education in Bangladesh, one of the five countries included in the study based on in-depth interviews. The elite there saw education primarily as a means to empower the poor, who would become able to fight for better living conditions (Houssain and Moore 2005). 4. The fi ndings for the Brazilian elites here contrast clearly with those found for the Philippines and for Bangladesh. For the latter in par ticu lar, the Th ird Sector (that which is neither government nor market) constitutes the best alternative to improve the nation’s social conditions. The Brazilian pattern of responses is similar to the one revealed by the South African elites, who also see the state as the actor that must take action and do not think much of NGOs (Reis and Moore 2005). 5. On the relevance of symbolic borders, see Lamont and Fournier (1992) and Lamont and Molnár (2002).

References Alexander, Jeff rey. 2003. The Meanings of Social Life: A Cultural Sociology. Oxford: Oxford University Press. De Swaan, Abram. 1988. In Care of the State: Health Care, Education, and Welfare in Europe and the USA in the Modern Era. London: Polity Press. Dumont, Louis. 1977. Homo aequalis: Genèse et épanouissement de l’idéologie économique. Paris: Gallimard. ———. 1983. Essais sur l’individualisme: Une perspective anthropologique sur l’idéologie moderne. Paris: Éditions du Seuil.

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Goode, Judith, and Edwin Eames. 1966. “An Anthropological Critique of the Culture of Poverty.” In Urban Life, edited by G. Gmelch and W. Zenner, 405–17. Long Grove, Ill.: Waveland Press. Guimarães, Antonio Sérgio. 2008. Preconceito racial: Modos, temas, e tempos. São Paulo: Cortez Editora. Houssain, Noami, and Mick Moore. 2005. “So Near and Yet So Far: Elites and Imagined Poverty in Bangladesh.” In Elite Perceptions of Poverty and Inequality, edited by Elisa P. Reis and Mick Moore, 91–127. London: Zed Books. Lamont, Michèle, and Marcel Fournier. 1992. Cultivating Differences: Symbolic Boundaries and the Making of Inequality. Chicago: University of Chicago Press. Lamont, Michèle, and Virág Molnár. 2002. “The Study of Boundaries in the Social Sciences.” Annual Review of Sociology 28:167–95. Lewis, Oscar. 1959. Five Families: Mexican Case Studies in the Culture of Poverty. New York: Basic Books. ———. 1966. La Vida: A Puerto Rican Family in the Culture of Poverty. New York: Random House. Münch, Richard. 1992. “The Production and Reproduction of Inequality: A Theoretical Cultural Analysis.” In Theory of Culture, edited by Richard Münch and Neil J. Smelser, 243–64. Berkeley: University of California Press. Narayan, Deepa, Raj Patel, Kai Schafft, Anne Rademach, and Sarah Koch-Schulte. 2000. Voices of the Poor: Can Anyone Hear Us? New York: Oxford University Press for the World Bank. O’Donnell, Guillermo, Jorge Vargas Cullell, and Osvaldo M. Iazzetta. 2004. The Quality of Democracy: Theory and Applications. Notre Dame: University of Notre Dame Press. Rae, Douglas. 1989. Equalities. 2nd ed. Cambridge: Harvard University Press. Reis, Elisa P. 2005. “Perceptions of Poverty and Inequality Among Brazilian Elites.” In Elite Perceptions of Poverty and Inequality, edited by Elisa P. Reis and Mick Moore, 26–56. London: Zed Books. ———. 2006. “Inequality in Brazil: Facts and Perceptions.” In Inequalities of the World, edited by Göran Therborn, 193–219. London: Verso. Reis, Elisa P., and Mick Moore, eds. 2005. Elite Perceptions of Poverty and Inequality. London: Zed Books. Swindler, Ann. 1986. “Culture in Action: Symbols and Strategies.” American Sociological Review 51:273–86. Telles, Edward E. 2006. Race in Another America: The Significance of Skin Color in Brazil. Princeton: Princeton University Press. Tocqueville, Alexis de. 1988. Democracy in America. Edited by J. P. Mayer. Translated by George Lawrence. New York: HarperPerennial. Verba, Sidney, and Gabriel Almond, eds. 1963. The Civic Culture: Political Attitudes and Democracy in Five Nations. Princeton: Princeton University Press. Verba, Sidney, Steven Kelman, Gary R. Orren, Ichiro Miyake, Joji Watanuki, Ikuo Kabashima, and G. Donald Ferree Jr. 1987. Elites and the Idea of Equality. Cambridge: Harvard University Press. Verba, Sidney, and Gary Orren. 1985. Equality in America: The View from the Top. Cambridge: Harvard University Press. Walzer, Michael. 1983. Spheres of Justice: A Defense of Pluralism and Equality. New York: Basic Books. World Bank. 2006. World Development Report 2006: Equity and Development. Washington, D.C.: World Bank.

4

Media Diversity and Social Inequality in Latin America Sallie Hughes and Paola Prado

In this chapter, we examine one set of mechanisms through which wealth inequalities are translated into political and social inequalities that create and reproduce “vitiated institutions of governance” that limit the experience and expression of citizenship (Crespo and Ferreira, chapter 2 in this volume). We also look at the construction and reproduction of worldviews or ideologies that, as Reis shows in chapter 3, structure interpretations of the causes, consequences, appropriateness, and possible solutions of gross inequality. Mass media in most Latin American societies, especially broadcast television, are controlled by a small elite that uses the media’s definitional power to further, consciously or unconsciously, a set of class- and family-based interests and ideologies that have helped maintain a status quo of social inequality. We argue that media power operates on two levels to maintain inequality: first, by influencing the political and policy-making process, and second, by helping structure societal norms of cultural appropriateness. The content produced in the largest Latin American media outlets constitutes the primary communicative sphere in which most citizens receive politically and socially relevant information and value cues. Though audiences are never passive receptors, media content constitutes an important source of raw material from which audiences form opinions and against which pre-held values and attitudes are continually compared, often reinforced, and sometimes modified (Gerbner et al. 2002). Since most of these outlets are controlled hierarchically in family entrepreneurial groups or governments that assert political control, media ownership carries with it a political power that must be considered in any evaluation of the causes, consequences, and potential remedies of inequality. The authors thank John Kimbert, Moses Shumow, Carolina Barruti, Diego Díaz, Hector Bahamonde, Anthony Garciá Marín, Carla Molina, and Alain Hourton for their research assistance.

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As is well known, Latin America’s new democracies have been criticized as “incomplete,” “shallow,” or “at risk” because unequal structures and practices that preceded the establishment of electoral democracies near the end of the last century remained in place. Even though regular elections have been established in almost all countries, inequality in political representation, standing before the law, income, wealth, and access to social programs and public goods remains higher than in any other region of the world (Portes and Hoffman 2003; Hoffman and Centeno 2003; Foweraker and Krznaric 2002). In this chapter, we first assess through empirical measures how media ownership structures and content reflect this inequality. Then, we argue on the basis of media-effects research and a mapping of the communications policy-making process that they do more than reflect inequality. They also reinforce inequality by influencing attitudes, values, political behavior, and policy making. Focusing on the Mexican case of concentrated and private media ownership, and placing it in comparative perspective, we propose that by privileging certain voices, lifestyles, worldviews, and political agendas in media content, as well as the direct instrumental use of content to promote the corporate, class, and personal interests of private owners of media in concentrated commercial media markets, a country’s media influence politics and policy making on issues affecting socioeconomic equality and the media system. Politics and policy making in turn influence media structure and, in a captured regulatory regime, maintain concentrated ownership structures. We believe that this produces an “inequality equilibrium” that can be altered through shifts in media policy, conducted through either democratic or authoritarian pathways. Both experiences are present in the region today, and indeed, media reform in recent years has become a very contentious political issue in many Latin American states (Kitzberger 2010). We rely on the theoretical lens and empirical tools of the media-diversity principle and of mass media as a contributor to hegemony in order to make this argument. Diversity in media content and structure has become a fundamental principle in the public policy and theory of democratic media systems because diversity in the groups, worldviews, and lifestyles represented in mass communication is thought to influence the essential practices and values of democracy, including equality, social cohesion, and popular sovereignty (McQuail 1992; Napoli 1999; van Cuilenburg 1999). Media diversity is conceptualized in this chapter as diversity in media ownership structure, workers, and content, as well as citizen access to diverse media types. We show through empirical measures that although variation exists, the general pattern in Latin America’s media systems is one of concentrated commercial sectors and weak public and civic media sectors, limited citizen access to diverse types of traditional mass media or new interactive media technologies, and broadcast news content that narrows worldviews,

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agendas, and perspectives to those of more powerful groups in society. We then use a discussion of the Mexican case and comparative research to propose a framework to explain how media diversity and societal inequality may be connected through the political process, arguing that media owners and content influence public opinion (real and perceived), elite and nonelite attitudes, elections, and policy formation. Mass media, like schools and family, are central agents of political socialization, helping ensure consensus on democratic politics and outcomes (Graber 2006, 182–217). Popu lar consent, however, is always at risk of being withdrawn (McNair 2007, 57). Why do Latin Americans consent to the maintenance of such high levels of inequality? Clientelistic patterns of social and political relations would seem to be part of the answer (see in this volume Reis, chapter 3; Blofield and Luna, chapter 5; Campello, chapter 6; and Filgueira et al., chapter 8), as is the hope that the recent “left turn” of several South American governments will address inequality in the near future, as Brazil may have begun to do (see in this volume Blofield, introduction; and Filgueira, chapter 1). We focus on one aspect of this complex process, the socializing functions and the political power of the mass media. Italian philosopher Antonio Gramsci studied popular consent in the 1920s to understand why Europeans endured extreme social inequality instead of supporting revolutionary movements. He came to argue that political power in democratic capitalist societies, even highly imperfect ones, relies little on coercion except in times of crises. Instead, it rests on “the strength of a worldview, a system of assumptions and social values accepted as ‘common sense,’ which legitimates the existing distribution of power, and indeed renders opposition to it inconceivable for most of the population” (Hallin 1987, 4; McNair 2007). The concept of hegemony plays a twin role in media studies. It helps explain why the media behave as they do, and it also helps conceptualize the role of the media in the reproduction of the dominant worldview. As critics have noted, however, dominant ideologies change, as do media representations. Media do not always homogeneously reinforce dominant ideologies, nor do audiences blindly absorb even the subtle messages that seem most effective in conveying value systems. But media’s role in sustaining dominant worldviews should be considered, especially in societies where mass media present “stable, coherent and homogenous” pictures of social reality (Gerbner et al. 2002, 58). Gerbner and colleagues’ work has found, for example, that long-term viewing of television’s similar and complementary visions of social life in the United States cultivates “the predispositions and preferences . . . that serve to define the world and legitimize a particular social order” (2002, 44). The mass media form “the mainstream of the common symbolic environment that cultivates the most widely shared conceptions of reality” (Gerbner et al.

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1978, 178). In Latin America, social order rests on acceptance of a degree of inequality that ranks the highest of any region in the world.

Media Diversity Media diversity implies that no substantive demographic group or way of thinking or being in a society is excluded from media content, among the journalists and workers who produce content, or in the media ownership structure. Media diversity is related to the level of equality in a society because it opposes “any claim to dominance or cultural superiority” (McQuail 1992, 144) and is also linked to social cohesion, or fraternity, because under certain conditions it can widen discussion and encourage public deliberation. Diverse representation in media ownership and content also is thought to increase openness to social change by allowing a wider range of ideas and voices to enter public discussion on an equal or proportional basis, giving new ideas the opportunity to sway majoritarian views (van Cuilenburg 1999, 192). Van Cuilenburg notes that social change “usually begins with minority views and movements.” If minorities or marginalized groups gain access to mass communication channels, “then social discussion and cultural dynamics may be expected to get a positive impulse” (1999, 192). Media systems that incorporate the perspectives of marginalized groups widen the variety of ideas, ways of being, and worldviews in the public discussion and increase the possibility that these ideas create support for social change. Media diversity can be operationalized in a number of ways. Napoli (1999; see also Lozano 2006; McQuail 1992; and Hoffmann-Riem 1987) reviewed public policy on media diversity and created an analytical framework consisting of three components of media diversity, each with several subcomponents. These were (1) diversity in media as a source, (2) diversity of media content, and (3) diversity in audience exposure to media. Source diversity in Napoli’s framework is diversity in the structure of ownership of media outlets or programming, as well as diversity of the media workforce. Content diversity consists of the range of the demographic characteristics of those featured in media content, the ideas and viewpoints found in media content, the geography from which programming is drawn or that it represents, and the different types of media formats and genres. Finally, diversity in the exposure of audiences to media content includes horizontal diversity (the diversity of media outlets available across the audience, similar to audience access) and vertical diversity (the exposure of individuals to different types of programming). We analyze a smaller range of indicators of diversity, focusing on national network broadcast television news because national broadcast television is the largest shared source of mediated political information and symbolic

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representation in each country in Latin America. We first review citizen access to diverse types of media to assess to what degree citizens can be exposed to media messages beyond network television. Then we analyze the diversity of broadcast television ownership, workforce, and content in four countries: Mexico, Chile, Costa Rica, and Uruguay. This smaller group of indicators covers the range of dimensions identified by Napoli. We conceive of the relationship between these variables as follows. First, media ownership structure and property regime strongly influence the traits of journalists and ultimately media content (the dependent variable). Journalists’ sociodemographic traits influence content but are not usually independent of ownership. This is because ethnographic work within newsrooms finds that the owners of Latin America’s family-owned firms or directors of state-run media, as well as their appointed managers in the newsroom, direct coverage hierarchically much in the way in which publishers of family-owned U.S. newspapers did in the 1950s (see Breed 1955; Hughes 2007; Waisbord 2000): by institutionalizing a set of cultural norms about journalism through rewards and sanctions, socialization, and role modeling. Although individual journalists with alternative worldviews occasionally change coverage in substantial and consistent ways, this tends to happen only when societal structures are in flux, as during accelerated transitions from authoritarian rule or when individual journalists break away from mainstream media to create niche publications that either have small audiences or soon fail (Hughes 2007; León-Dermota 2003; Rockwell and Janus 2003). Second, as discussed earlier and elaborated later, content has real and perceived effects on audiences and on political actors. These effects influence audiences, public opinion, and policy makers, although not always in a direct way. Real and perceived effects become the main resource for dominant media to enter the media policy arena in favor of maintaining the status quo from which they benefit. The key point is that in controlling the content reaching mass audiences, the owners of Latin America’s market-dominant media amass enough political power to preserve concentrated ownership by capturing state power to legislate democratically and regulate the structure of the national media system. In the next sections we present data on and discussion of Latin Americans’ access to different types of national media and then delve in depth into the structural, workforce, and content diversity of the politically dominant medium, national broadcast television.

Diversity in Access to Types of Media Table 4.1 shows access to traditional and new media forms of delivery, as well as data on levels of economic output and income distribution, for nineteen Latin American countries. The data reveal a number of patterns.

,. ,. ,. ,. ,. ,. — ,.

,. ,. ,. ,. ,. . ,. ,. ,. ,. ,. ,.

, , ,, , , , — ,

, , , , , , , , , , , ,

. . . . . . . . . . . .

. . . . . . — .

. . . . . . . . . . . .

. . . . . . — . . . . . . . . . . . . .

. . . . . . — . . . . . . . . . . . . .

. . . . . . . .

Printed daily newspapers per  people ()

. . . . . . . . . . . .

. . . . . . . .

Radios per  people ()

. . . . . . . . . . . .

. . . . . . . .

TVs per  people ()

Traditional media

. — — . . — . . . . . .

— — . . . . — .

Households with TV sets ()

. . — . . . — . . . . .

. . . . . . — —

Cable subscribers per  people

. . . . . . . . . . . .

. . . . . . . .

Internet users per  people ()

. . . . . . . . . . . .

. . . . . . . .

Broadband subscribers per  people ()

New media

. . . . . . . . . . . .

. . . . . . . .

Mobile cellular subscribers per  people ()

Sources: World Bank Development Indicators, http://data.worldbank.org, and International Telecommunications Union, http://www.itu.int/ITU-D/ict/index.html, most recent dates available for both sources.

Argentina Bolivia Brazil Chile Colombia Costa Rica Cuba Dominican Republic Ecuador El Salvador Guatemala Honduras Mexico Nicaragua Panama Paraguay Peru Uruguay Venezuela Average

Income or consumption share for top %

Income or consumption Gini share for coefficient middle %

GDP (millions US$, )

GDP per capita (US$)

Measures of income inequality

Economic output

Table 4.1 Country-level economic indicators and access to diverse types of media

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First, among mass media, broadcast media reach far more Latin Americans than any other type of media. Radio has the most universal reach of all media in Latin America, followed closely by broadcast television. In fact, independently run regressions on country-level economic output (GDP) and income inequality measures (per capita GDP, the Gini coefficient, and proportion of income controlled by various quintiles of the population) found access to radio to be the only medium insensitive to any of these measures. It seems that radio access is so ubiquitous that a country’s level of economic production or degree of inequality does not matter. Commercial radio has the widest reach but tends either to avoid news and information in favor of commercial music formats or to take center-to-right political positions in line with its commercial owners. Television network ownership is most often commercially operated and tends to follow a mix of commercial, corporate, and class-based incentives in deciding the parameters of news production (Hughes 2006; Rockwell and Janus 2003; Fox 1997). Commercial ownership results in varying degrees of tabloidism and an ideological slant toward conservative social views and status quo economics. As we shall see, television audiences also receive televised representations of society that are nondiverse in class, race, and gender. Access to newspapers is far more limited than access to either radio or television. In statistical tests, newspaper access was found to be sensitive to a country’s level of economic output and a wider variety of measures of a country’s level of income inequality. This fact is significant for judging citizen access to diverse media content. Newspapers tend to offer a more diverse set of ideas on public affairs than commercial broadcast radio or television. Many Latin American countries have at least a few widely circulating newspapers that write from different political perspectives or include such perspectives in their editorial pages, but their distribution is limited to a wealthier urban audience. An alternative to the elite nature of access to newspaper content diversity is community, nonprofit radio, which offers perspectives that contrast with those usually found on commercial radio and television. Still, community radio reaches a smaller audience and usually operates in legally and financially precarious circumstances. For example, until 2003 only 1 community radio station in all of Mexico had government permission to operate. In 2007 there were 11 legally operating stations, compared with 1,483 stations that are either commercial (almost 9 out of every 10 stations), state run without structural mechanisms for editorial independence (practically 1 out of every 10 stations), or university run with varying degrees of independence (fewer than 3 out of every 100 stations) (see Calleja and Solís 2007, 55–56). In Argentina and Chile, community radio is similarly marginalized. A dictatorship-era law in effect for twenty-five years prohibited the operation of nonprofit radio in

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Argentina until 2007, when five licenses to operate were allotted (Foro Argentino 2007). In Chile, the law limits community radios dedicated to discussion of social issues to transmission on low-power stations (Estrada 2007). Another trend notable in the data is that new media remain a minority phenomenon in Latin America. Their ability to diversify media access remains out of reach for the average Latin American. For now, only a minority of the population in each country enjoys basic Internet access; in the largest most-developed countries, Internet access never tops one-third of the population. On the other hand, use of cellular telephones has expanded exponentially, and cell-phone signal-distribution networks can be used to transmit video and data, as well as voice, wherever policy makers grant the proper licenses. Telephone, cable, and satellite operators are vying politically to control markets for digital transmissions of voice, video, and data by pressuring legislators. Depending on whether they are dominant market actors, smallsize enterprises, or new entrants into the market, business owners want governments either to constrain or to increase the distribution of concessions and to apply or to ignore antitrust rules. New policy decisions about expansion and control of distribution networks (cable, satellite, telephony fiber optics, WiMax) and determinations about whether these distributors must carry independently produced content will set the pa rameters of future access to digital content and the degree of content diversity. At this time, however, broadcasting remains the delivery platform available to the large majority of Latin Americans. Over-the-air radio and television broadcasts are the only media most people can access on a regular basis. A final consideration is that access to a wide variety of media in these countries is related to the strength of a country’s middle classes. This is evident from statistically significant values of R from separately run one-predictor linear regressions run on the data from table 4.1. Except for radio, statistical tests found that the strength of the relationship between media access variables and per capita GDP was always stronger than the relationship between media access and the country’s GDP. In other words, the average individual salary was more relevant for media access than the size of the economy as a whole. Moreover, access to daily newspapers, the medium that covers public affairs in the most diverse way, was especially sensitive to economic equality measures. Statistically significant relationships were found between newspapers printed per hundred residents and GDP per capita, the Gini coefficient, the percentage of income received by the richest 20 of the population, and especially the degree of income received by the middle 60 of the population. In other words, in those countries where average individual income is higher, more Latin Americans have access to newspapers, television, the Internet, and personal computers. In countries with lower income inequality, the population has greater access to the principal chronicle of public affairs,

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daily newspapers. Wherever income inequality is higher, more Latin Americans rely on broadcast radio and television, which tend to be controlled by a handful of media owners. Ownership Diversity

Radio is the universal medium in Latin America, but television network audiences are greater than those for any single radio station because of national broadcast reach and ownership concentration. As table 4.2 shows, most Latin American countries have extremely concentrated television ownership and market structure. Aside from Cuba, where the state owns all television stations, the highest market concentration occurs in Central America and Mexico, and the lowest can be found in Chile and the Dominican Republic. In most countries, private broadcasters and governments have coexisted in mutually beneficial relationships that explain why governments have protected or promoted monopoly, duopoly, and oligopoly broadcasters from wider competition. These relationships become strained under two circumstances: when leftist governments are perceived as threatening to corporate oligopolies or private ownership, as happened in Bolivia, Ecuador, and Venezuela in the 2000s as well as under Echeverría in Mexico (1970–76), or when market dominance in conjunction with weakly formed democratic mechanisms of regulation and media policy making give media owners power to capture state authority (Rockwell and Janus 2003; Rockwell 2007; Gaytán Alcalá and Fregoso Bonilla 2006; Hughes 2009; Fernández and Paxman 2001). As table 4.2 indicates, the amount of structural diversity in most of today’s Latin American media systems is low. Guatemala is the most concentrated broadcast television market in Latin America outside Cuba. In that country, a single politically connected owner controls all national broadcast television. Politically agnostic as long as his corporate interests are protected, this owner grants advertising and favors in the news to whichever candidates support his corporate agenda and worldview (see Mastrini et al. 2009; Rockwell and Janus 2003; Weissert 2002). Similarly, Panama’s former monopoly broadcast television network Medcom was formed in 1989 by two families close to the former governments of generals Omar Torrijos and Manuel Noriega (Rockwell 2007, 44–45). A television duopoly now exists in the country; Medcom and Televisora Nacional control 96 of the small country’s airwaves, according to the trade directory Producción y Distribución (2008). Both networks have extensive personal ties to President Martin Torrijos (2004–9) (BBC Summary of World Broadcasts 2004). Mexico’s broadcast television market is the most concentrated of the region’s larger countries, with two companies controlling 92 of the national

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elite culture, framing, and public opinion Table 4.2 Television firm concentration in Latin American markets VHF broadcast TV national market share % controlled by top two owners Cuba Guatemala Panama Mexico El Salvador Honduras Nicaragua Costa Rica Colombia Argentina Brazil Paraguay Peru Bolivia Venezuela Uruguay Ecuador Chile Dominican Republic

. . . . nd nd nd . . . . . . . . . . . .

Market concentration (Herfindahl index) , , , ,

, , ,

, ,

Source: Adapted from self-reported data in Producción y Distribución (2008), a regional broadcast trade magazine, except for Mexico, Brazil, Guatemala, and Cuba. Mexico broadcast TV data come from IBOPE, 6–24 hours, 28 cities, 2005, reported in Consejo de Investigación de Medios (2006). Brazilian broadcast TV data come from IBOPE national data for 2007, reported in Mídia Dados, http://www.gm.org.br/novosite/midia/televisao.asp. Guatemala’s national open-air broadcasting (VHF) is owned by one person, making it a monopoly. The Cuban government owns all broadcast media in Cuba. Note: The U.S. Department of Justice standard for market concentration is a Herfi ndahl index of 1,800 or higher. The Herfi ndahl index is calculated by summing the squares of each market player and runs between 0 and 10,000. Higher scores indicate higher concentration. Data are reported where sufficient sources were available for calculations, but trade publication data must be viewed with some caution.

audience. Televisa dominates the market, controlling a 64 audience share. As shown in table 4.2, which uses the Herfindahl index to measure industry concentration, the level of concentration in the Mexican broadcast television market is almost three times the U.S. Justice Department’s cutoff for approval of local television mergers (Consejo de Investigación de Medios 2006, 58, 94). Pay television concentration is lower on a national level—six companies control 80 of the subscription market—but reaches only about 26 of households, compared with 85 for over-the-air broadcast television. This market is also dominated by Televisa.

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Mexico’s concentrated television ownership structure is the result of the seventy-one-year-old Institutional Revolutionary Party (PRI) regime, which protected Televisa from commercial competition in exchange for favorable news coverage until 1993, when privatization of state-owned stations created the secondary national network TV Azteca. Control of the national symbols and political messages reaching mass audiences was one of the foundations of PRI longevity. Despite campaign promises, the protection of the dominant networks did not change after the PRI lost the executive to the conservative National Action Party in 2000. At the other end of the spectrum, in the Dominican Republic, eight national broadcast television channels operate in a country of almost ten million people. The government runs two television channels; five private companies own the other six. Grupo Corripio controls the largest market share through its operations Teleantillas (Channel 2) and Telesistema (Channel 11), which reach a combined 18 of the national audience. Telemicro (Channel 5), controlled by businessman Juan Ramón Gómez Díaz, reaches the largest audience share (16) of any single broadcaster. Media scholar Antonio V. Menéndez Alarcón’s work (1992) suggests that the Dominican Republic’s more fragmented television ownership structure resulted from a decision made once the Trujillo dictatorship’s ironclad control of broadcast media ended to base television ownership on purely commercial criteria. The country’s largest commercial conglomerates acquired television licenses to broadcast programming that sold their products and worldviews. However, Menéndez Alarcón argues that fragmented ownership has not produced diversity in content because of owners’ homogeneous views of Dominican society and the commercial model that funds all television programs, including newscasts. Among the Latin American countries for which we have full market data, Chile displays the most structurally diverse ownership structure. This is the only country that meets the U.S. Justice Department’s merger test benchmark for a competitive market. Chile’s five national television broadcasters include three private commercial networks, a state-owned “public” network, and a university-based network. The mixed ownership structure was established by competing political parties before the beginning of the socialist regime of Salvador Allende in 1970 in an attempt to protect the media system from government control (Fox 1997). The structure was reconstituted after the exit of dictator Augusto Pinochet in 1990. As we shall see, ownership diversity in network television has not led to content diversity on many issues, although the Chilean data suggest that further analysis should be done to assess within-country differences between networks. To summarize our findings on access and ownership, most Latin American audience members can choose between relatively few broadcast television networks owned by a few family-owned companies or occasionally the

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state. Only one country for which we had full data would be considered diverse under the U.S. Justice Department’s merger standard, and in twelve of sixteen countries two television networks control more than half the viewing audience. In four countries concentration is extreme, with only two players controlling more than 90 of the audience. What about diversity in content? Diversity in Prime-Time Network Television News Methodology

To assess the amount of diversity in the workforce and content on primetime network television news, we performed a content analysis of the top television news programs in four countries— Chile, Costa Rica, Mexico, and Uruguay. We selected countries that vary in the degree of diversity in television ownership and the level of income inequality in society. On a regional level, these countries cover a range of levels of broadcast-market competition and income inequality. The highest level of income inequality among these countries was found in Chile; Mexico and Costa Rica were midrange; and Uruguay had the lowest levels of income inequality. As for broadcast concentration, our cases ran from lower television-market concentration in Chile and Uruguay to higher concentration in Mexico and Costa Rica. The programs coded were the top two prime-time newscasts for Chile, Costa Rica, Mexico, and Uruguay, using network ratings data from the trade publication Producción y Distribución for Costa Rica and Uruguay and the Brazilian Institute of Public Opinion and Statistics (IBOPE) ratings service data for newscasts in Mexico and Chile. The programs were the following: • Chile: Chilevisión, Noticias Central; Televisión Nacional de Chile, 24 Horas Central • Costa Rica: Teletica, Telenoticias Teletica; Repretel, Noticias Repretel • Mexico: TV Azteca, Hechos de la Noche; Televisa, El Noticiero con Joaquín López Doriga • Uruguay: SAETA, Subrayado Central; Teledoce Televisora Color, Telemundo The sample was a constructed week of newscasts, five for each program, broadcast on June 11, 19, 27, and 30 and July 8, 2008. Although the constructedweek sampling method facilitates generalizability to all programs aired during those five weeks, the time period (June and early July 2008) was chosen for convenience. The level of coding was either the news segment (defined thematically and appearing in a sequential period in the newscast) or the figures featured in the news (individuals, as well as groups or organizations),

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so we could analyze either news segments or figures as needed to respond to particular research questions. In total, we coded 233 news segments and 482 figures in the news for Chile, 290 news segments and 530 figures in the news for Costa Rica, 305 news segments and 654 figures in the news for Mexico, and 448 news segments and 527 figures in the news for Uruguay. There were three coders, one for Mexico (the lead author of this chapter, a bilingual English speaker), another for Chile and Uruguay (a native Spanish speaker), and a third for Costa Rica (a bilingual English speaker). The lead author double-coded three programs with the native Spanish speaker, equal to 15 of his coding (20 programs). The lead author separately double-coded a program with the bilingual coder, equal to 10 of his coding (10 programs). Simple agreement and controlled agreement (Krippendorff ’s alpha) are reported for each coder pair in table 4.3. All are within acceptable agreement parameters with the exception of the skin-tone variable. For those, the simple agreement percentage is acceptable, but controlled agreement is slightly below normally acceptable standards. That should be kept in mind when considering these data. Our coding captured what Filgueira (chapter 1 in this volume) identifies as the social segments most vulnerable to the emerging risks of the transformed labor market, low-skilled workers, women, and young people, as well as traits such as gender and race that Crespo and Ferreira (chapter 2 in this volume) point out produce inequalities of opportunity brought about by circumstances beyond individual control. We coded for gender, skin tone, and occupation as a proxy for class, for figures in the news, and coded gender and skin tone for broadcasters. For groups of reporters, which occurred infrequently, only the first reporter was coded. The skin-tone measure intends to be only a very general indication of representations of race and ethnicity in television news. Coders looked only at the shade of the skin, not at the phenotype traits of the person on the air. To code for class, we used a scale based on Portes and Hoffman (2003) and coded where the occupation of the person on the air could be determined. The top three economic classes are big capitalists, executives (private and government), and professional/elite workers. Other classes are middle sectors, the formal proletariat (essentially skilled formal-sector workers), and the informal proletariat (less skilled, informal workers). The level of coding for time on the air was the news segment in seconds, not the individual actor or journalist. That means that airtime of figures featured in the news refers to the on-air duration of the news segment in which they appeared. For journalists, it means that airtime refers to the on-air duration of the news segment that they reported.

122 Table 4.3

elite culture, framing, and public opinion Intercoder reliability scores

Coders  and  Agreement Krippendorff ’s N (%) alpha agreements Actor gender Actor class Journalist gender Actor speak Journalist ethnicity Actor ethnicity Tone Topic

N N N disagreements cases decisions

    

. . . . .

    

    

    

    

  

. . .

  

  

  

  

N = 3 of 30 programs.

Coders  and  Agreement Krippendorff ’s N (%) alpha agreements Actor gender Actor class Journalist gender Actor speak Journalist ethnicity Actor ethnicity Tone Topic

       

. . . . . . . .

N N N disagreements cases decisions

    

    

    

    

  

  

  

  

N = 1 of 10 programs. Note: For actor and journalist variables, groups were excluded in the analysis in all except tone. For ethnicity, the check was run on white versus all other skin tones.

Findings

The central finding from the analysis is that network television news in these four Latin American countries reflects the unequal power structures of Latin American society, not its actual diversity or an ideal type that might help enhance fraternity, equality, or positive social change. Television news more likely reinforces the dominance of elites. Workforce Diversity

Table 4.4 presents measures of the demographic diversity of the journalistic workforce and the economic and demographic diversity of figures presented

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Table 4.4 Socioeconomic diversity on network news in percentages (coding level = news segments in seconds) Journalists Country Male White Chile Costa Rica Mexico Uruguay Average

Top  Gender Race Class Avg. Gender Race gapa gapab Male White classes gapa gapa gapac gap

 

+ +

+ −

 

 

 

+ +

+ −

  .

+ + +

+ + +

  

  .

  

+ +. +

+ +. + + + + − +. +

   . 

Figures featured in the news

+. + + −

a The gap measure is the number of percentage points that the representation of a group in the media is above or below the percentage actually found in the national population. National-level sex-ratio data are reported in Central Intelligence Agency (2008). Class data for 1998 are based on Portes and Hoff man (2003, 57–58). b Official data on ethnicity or race were not widely available. Costa Rican, Chilean, and Mexican censuses do not separate a “mestizo” category from “white/European” categories. We use the comparative ethnicity percentages calculated by Lizcano Fernández, the most detailed cross-national comparison available, who relies on World Bank, CIA, and encyclopedia reports. A special Uruguayan census calculation in 2006 reported that the country was 94.5 white, but that figure was based on self-perception, and there is a tendency toward “whitening” (on “whitening,” see De Ferranti et al. 2003, 82, 83). Lizcano Fernández’s figures report Creole/European ethnicity (versus Indian, mestizo, mulatto, black, Asian, and black-Garifuna). They are as follows (Lizcano Fernández 2005, 218):

Chile Costa Rica Mexico Uruguay

52.7 82 15 88

c

The top 3 social classes are big capitalists, executives (private and government), and professional/elite workers. Other classes are middle sectors and formal and informal proletariat. Based on Portes and Hoff man (2003).

in the news. It reports male versus female broadcasters and figures in the news (no mixed groups were included), white skin tone versus others for both groups, and dominant economic classes versus subordinate classes for figures featured in the news. The gap measure gives the number of percentage points that media representations of gender, race, and class differ from the percentage in society. It is the most important indicator when one is considering whether network television news presents the demographic and economic diversity of society in its newscasts. Journalists and figures represented in news content were overwhelmingly white males who came from upper economic strata. Moreover, gender, racial, and class analysis finds that wealthier white men were featured in dominant and legitimizing roles more often than other groups. Male reporters filled 85 of airtime in Mexico, 83 of airtime in Costa Rica, 81 of airtime in Uruguay, and 68 of airtime in Chile. The average across the

124

elite culture, framing, and public opinion

countries was 79. Compared with the general population, this overrepresents men by an average of 30 percentage points. Whether whites were overrepresented in the news workforce depends in part on the racial makeup of society, which varies widely across the four cases. The general Mexican population is 15 white, 70 mestizo, 14 Amerindian, and 1 other (Lizcano Fernández 2005, 218). Mexico’s white journalistic workforce filled 59 of airtime, amplifying the proportion of whites in society by 44 percentage points, or about four times their presence in society. Mexico has heralded its mestizaje in state ideology and everyday life, but people of European appearance still control a disproportionate amount of television airtime. Chile’s population also has a substantial indigenous heritage, but there was not as much racial mixing as in Mexico. Lizcano Fernández estimates that the Chilean population is 53 white/European, 40 mestizo, and 8 indigenous (2005, 218). White Chilean broadcasters, on the other hand, filled 92 of airtime. The population in Uruguay and Costa Rica is predominantly of European ancestry, 88 in Uruguay (with a 12 minority of African heritage) and 85 in Costa Rica (Lizcano Fernández 2005, 218). Uruguayan broadcasters, who were all white, amplified whiteness in society by 12 percentage points. This is the smallest race gap across the four countries, in part because the country is mostly of European heritage. Costa Rica was an interesting exception to the pattern in the other countries. The gap ran in the other direction. Journalists of color were amplified substantially in the newscasts, in part because one of the main anchors at the network Repretel was mestizo and field reporters seldom appeared on air in Costa Rica, where news anchors voiced over most of the reports. When we consider the newscasters in the four countries as a group, white men reported or anchored 53 of airtime, men with light brown skin tones reported or anchored 26 of airtime, white women reported or anchored 12 of airtime, men with dark brown skin tones reported or anchored 5 of airtime, and women with light brown skin tones reported or anchored 4 of airtime. There were no black or Asian reporters or female reporters with dark brown skin tones. To summarize, the journalistic workforce in prime-time network television news did not reflect the gender balance in any of these societies. The racial makeup of network broadcasters, according to the crude measure of skin tone, approximated the more homogeneous Uruguayan society. Contrary to the other cases, Costa Rican newscasts greatly overrepresented the presence of journalists of color, although the finding was driven by one newscaster.

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Representations of Societal Figures

The demographic and economic characteristics of people featured in news content also did not reflect their societies, although the degree of difference varied across the four countries. The least diverse newscasts again were broadcast in Mexico; the most diverse were broadcast in Costa Rica and Uruguay. News content overrepresented men and the wealthiest sectors in society in all countries. Men were featured in 87 of airtime in Mexico, 80 in Uruguay, 77 in Chile, and 72 in Costa Rica. In the gap measure, males were overrepresented by 40 percentage points in Mexico, 31 points in Uruguay, 28 points in Chile, and 21 points in Costa Rica. On average, prime-time network news across the countries amplified the presence of men in society by 30 percentage points. As for class, the wealthiest were overrepresented by an average of 47 among the four countries; overrepresentations ranged from 67 points in Mexico to 13 points in Costa Rica. In quantitative terms, the overrepresentation of the economic elite was the largest distortion of societal characteristics. Newscast representations of race were more diverse, but the pattern across three of the four cases was an overrepresentation of whites. People of white skin tone were featured on-air 53.5 of the time, varying at the country level from 91 of airtime in Uruguay to 28 in Costa Rica. The largest positive gap between prime-time network news representations of race and the racial makeup of the Latin American societies again occurred in Mexico, where white people were overrepresented by 29 percentage points. Costa Rican newscasts underrepresented whites. What about the diversity of roles attributed to people in news representations of reality? Newscasts identified people in roles likely to be associated with only one or two functions in society rather than a wide range of social roles and economic occupations. In more than 70 of airtime, people featured in the news were either acting as government officials or in roles associated with crime and public security (police, military or fire officials, criminals, victims of crime or human rights abuses, bystanders and witnesses, or protesters). Roles in other aspects of social and economic life were barely mentioned or absent. Table 4.5 shows dominant role representations found in prime-time network news. Gender, race, and class analyses reveal clear differences in how social groups were portrayed. The most striking contrast in the gender analysis is that women were portrayed most often as victims, while men were portrayed most often as government officials. Women were portrayed as victims (32), government officials (15), bystanders or witnesses (9), teachers and other public ser vice workers (7), artists and celebrities (6), consumers of education and other public ser vices (5), petty criminals (5), security officials

126

elite culture, framing, and public opinion Table 4.5 Diversity in roles of figures in prime-time network news (coding level = news segments in seconds) Role

%

Cum. %

Security-related Government officials High artists or pop celebrities Teachers, health-care professionals, social workers, and the like Experts Consumers of education, health care, social assistance programs Criminal leaders Big business managers, spokesmen, association officers, and the like Commercial consumers and customers Academics, intellectuals Journalists from network Scientific experts Children, adolescents Other experts  categories each < %

   

   

 

 

 

 





     

     

Note: Domestic news only.

(2.5), commercial consumers and customers (2), and academics or intellectuals (2). Only in Mexico were women more often portrayed as government officials than as victims. Women were not featured prominently in business roles. Female role depictions remained fairly uniform across all countries and were more diverse than male roles. Men, in addition to being depicted in the role of government officials (31), were prominently featured in ways related to crime and public security as police, fire, and military officials (19.5), victims (10), petty criminals (7), bystanders and witnesses (4), criminal leaders (2), informal-sector workers (2), businessmen (2), human rights ombudsmen or lawyers (2), and scientific experts (fewer than 2). The results of the gender analysis are presented in table 4.6. Race analysis found that both whites and nonwhites were depicted predominantly in either security roles or as government officials, although whites were more often portrayed as government officials and less often in security roles than nonwhites. Whites were featured in security roles 46 of the time and as government officials 21 of the time. Nonwhites were featured in security roles 61 of the time and as government officials only 9 of the time. Disaggregating the security roles revealed that nonwhites were more likely to be portrayed as criminals, but otherwise there were few differences. Whites were depicted as security officials (19), victims (14), and criminals (7),

Petty criminals, gang members

Security officers (police, fire and military)

.

.

.

.

.

.

Bystanders, witnesses

Teachers, health-care professionals, social workers, and the like

High artists or pop celebrities

Consumers of education, health care, social assistance programs Petty criminals, gang members

Doctors, scientists as experts or authorities in the field Defense lawyers

Consumers of education, health care, social assistance programs

.

.

.

Security officials

Commercial consumers, customers Academics, intellectuals

Big business managers, spokesmen, association officers, and the like (not owners) Commercial consumers, customers

Bystanders, witnesses

Victims (crime, human rights, other) All government officials

Victims (crime, human rights, other) All government officials

.

Chile

All countries

.

.

.

.

.

.

.

.

.

.

Children, adolescents, in that role

Academics, intellectuals

Protesters

Teachers, health-care professionals, social workers, and the like Consumers of education, health care, social assistance programs Petty criminals, gang members

All government officials

Victims (crime, human rights, other) High artists or pop celebritites Bystanders, witnesses

Costa Rica

Female figures in the news, followed by percentage of females in that role

Table 4.6 Role depictions by gender

.

.

.

.

.

.

.

.

.

.

.

Children, adolescents, in that role

Academics, intellectuals

Small business actors

Teachers, health-care professionals, social workers, and the like Church high officials or saints

Bystanders, witnesses

.

.

.

.

.

.

Victims (crime, human . rights, other) Consumers of education, . health care, social assistance programs Security officers (police, . fire, and military)

All government officials

Mexico

.

.

.

.

.

.

.

.

.

.

(continued)

Other experts not in a previous category Bystanders, witnesses

Consumers of education, health care, social assistance programs Users of public transportation

Journalists (as actors in the story)

Big labor-union officials

Teachers, health-care professionals, social workers, and the like Petty criminals, gang members

Victims (crime, human rights, other) All government officials

Uruguay

Academics (university)/ intellectuals

Activist leaders, spokespersons

.

.

.

.

.

.

Criminal leaders

Informal-sector actors

Big business managers, spokesmen, association officers, and the like (not owners) Human rights ombudsmen

.

.

.

.

.

.

.

.

.

.

Academics (university)/ intellectuals

Consumers of education, health care, social assistance programs

Teachers, health-care professionals, social workers, and the like

Sports, not athletes

Bystanders, witnesses

Petty criminals, gang members High artists or pop celebrities

Security officers (police, fire, and military) Victims (crime, human rights, other) All government officials

Costa Rica

.

.

.

.

.

.

.

.

.

.

Big business managers, spokesmen, association officers, and the like (not owners) Human rights ombudsmen

Informal-sector actors

Criminal leaders

Petty criminals, gang members

Victims (crime, human rights, other) Journalists as actors in story

Security officers (police, fire, and military) Bystanders, witnesses

All government officials

Mexico

.

.

.

.

.

.

.

.

.

.

Other experts not in a previous category

Athletes

Journalists (as actors in story) High artists or pop celebrities

Small business actors

Security officers (police, fire, and military) Petty criminals, gang members Victims (crime, human rights, other) Bystanders, witnesses

All government officials

Uruguay

.

.

.

.

.

.

.

.

.

.

Notes: The all-countries category was weighted by the number of cases per country: Costa Rica = 404, Chile = 373, Mexico = 344, Uruguay = 312. Groups of figures with different sexes were not included in this analysis. Sports, general weather, and international news were not included in this analysis.

.

Bystanders, witnesses

Victims (crime, human rights, other) Petty criminals, gang members Doctors, scientists as experts or authorities in the field Big business managers, spokesmen, association officers, and the like (not owners) Criminal leaders

.

Security officers (police, fire, and military) Victims (crime, human rights, other) Petty criminals, gang members Bystanders, witnesses

Doctors, scientists as experts or authorities in the field

Security officers (police, fire, and military) All government officials

.

All government officials

.

Chile

All countries

Male figures in the news, followed by percentage of males in that role

Table 4.6 (continued)

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129

Table 4.7 Role depictions by racial groups (coding level = news segments in seconds) Role

%

Whites Government officials Security officials Victims

  

Bystanders or witnesses Petty criminals, gang members High artists or pop celebrities

  

Teachers, health-care professionals, social workers, and the like Experts Academics, intellectuals Big business managers, spokespersons, association officers, and the like



  

Role Nonwhites Security officials Victims Petty criminals, gang members Government officials Bystanders or witnesses Consumers of education, health care, and the like Commercial consumers and customers Protesters Children, adolescents Criminal leaders

%       

  

Notes: Sports, general weather, and international news were not included in this analysis. Results were weighted by the number of cases per country: Costa Rica = 404, Chile = 373, Mexico = 344, Uruguay = 312. Groups of figures with different skin tones were not included. Security-related roles include police, military, or fire officials, criminals, victims of crime or human rights abuses, bystanders and witnesses, and protesters.

while nonwhites were depicted as security officials (22), victims (16), and criminals (13). Beyond government and security, there were differences in other prominent role depictions. Whites were more likely to be portrayed as artists or celebrities, public ser vice professionals, experts, academics or intellectuals, and actors in big business. Nonwhites were portrayed as consumers and as children or adolescents. Racial group role depictions are shown in table 4.7. Class analysis of role portrayals revealed large differences in the depictions of people from upper classes versus those from middle and lower classes. People from the upper classes were depicted primarily as government officials (57) and then in security-related roles (13). People from the lower classes were depicted overwhelmingly in security-related roles (70) and then as government officials (6) and consumers (5). In the breakdown of the security roles, members of the middle and lower classes were depicted primarily as victims (23) and then as security officials (22) and criminals (15). On the other hand, upper-income people were rarely portrayed as victims (1) or as criminals (1). They were instead most often portrayed as security officials (9) when they took on a security-related role. Depictions by class sector are shown in table 4.8.

130 Table 4.8

elite culture, framing, and public opinion Role depictions by class sector (coding level = news segments in seconds)

Role

%

Upper classes Government officials Security-related High artists or pop celebrities

  

Big business actors—managers, spokesmen, association officers, and the like Academics, intellectuals



Experts Journalists from network Teachers, health-care professionals, social workers, and the like Big business owners Human rights ombudsmen



Role Lower classes Security-related Government officials Consumers of education, health care, and social assistance programs Commercial consumers and customers

%   





  

Teachers, health-care professionals, social workers, and the like Children, adolescents, in that role Small business actors Informal-sector actors

 

Users of public transportation Sports (not athletes)

 

  

Notes: Sports, general weather, and international news were not included in this analysis. Results were weighted by the number of cases per country: Costa Rica = 404, Chile = 373, Mexico = 344, Uruguay = 312. Upper classes are big capitalists, executives (private and government), and professional/elite workers. Lower classes are middle sectors, proletariat, formal and informal proletariat. Based on Portes and Hoff man (2003). Security-related roles include police, military or fire officials, criminals, victims of crime or human rights abuses, bystanders and witnesses, and protesters.

In summary, prime-time network news depicted Latin Americans in only a few roles, either related to crime and public security or as government officials. There was little cross-national variation on this finding with the exception of Mexico, where prime-time network newscasts tended to focus more on government officials than the other countries’ newscasts. When gender, race, and class were taken into account, clear differences emerged. Upper-class white men were portrayed more prominently in traditionally more powerful roles; women, people of color, and people of lower-class status were depicted in less powerful roles. Newscasts reflected the unequal stratification of power in society. Idea Diversity

To get a sense of diversity in the ideas and worldviews presented in the news, we analyzed the diversity of the topics that constituted the news agendas of the programs, the types of actors in the news who were legitimized in coverage, and the geographic origin of the news segments.

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Table 4.9 Prime-time network news agendas (coding level = news segments in seconds) General topic

Chile

Costa Rica

Mexico

Uruguay

Average

Crime, public security, disasters All government and politicsa Subtotal Business and economy Human interest Culture, entertainment Social policyb Other Communications, media outlets, and media policy Corruption, nongovernmental Minorities and emigration Environment Church, religion Poverty Human and civil rights, no government involvement

. . . . . . . . .

. . . . . . . . .

. . . . . . . . .

. . . . . . . . .

. . . . . . . . .

. . . . . .

. . . . . .

. . . . . .

. . . . . .

. . . . . .

Note: Sports, general weather, and international news were not included in this analysis. Government, elections, general politics, government-related human rights, government-related corruption. b Education, health care, social assistance programs, public transportation. a

The topics that made up the news agendas are reported in table 4.9. Security, government, and politics dominated the news agenda in all countries, fi lling an average of 73 of airtime. Crime and public security dominated coverage in all countries except Mexico. Issues related to inequality, such as education, health care, poverty, or even business and the economy, were eclipsed in prime-time network news. Comparative media research suggests a couple of reasons for the focus on government and security that are supported by the data. Like elites in general (see Reis, chapter 3 in this volume), journalists in Latin America tend to construct reality through the lens of government action or inaction. For example, a news segment on litter covering some Mexican archaeological sites focused primarily on government complacency instead of on visitors’ misbehavior or on the damage to cultural heritage. For a segment on schools, the focus was that a government list of schools that failed to meet standards— announced at a ministry press conference—was riddled with errors. Th is cultural proclivity to focus on government news and actors has been well documented in other studies in Latin American journalism (Waisbord 2000), as well as in the United States (Bennett 2003). Rather than a regional crime wave, a reason for the focus on crime seems to be that all but one of these networks are commercially operated, and

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commercialization of the news tends to increase coverage of crime and other sensational topics in order to increase ratings. Mexico is undergoing a crime wave fueled by drug trafficking and official corruption, but the increase in crime coverage began as early as 1997 and has been linked by news executives to the need to increase ratings (Hughes 2006; Hallin 2000). Moreover, crime rates are significantly lower in Uruguay, but crime coverage there also dominated the news. Despite the differences in crime rates, the portion of the newscast dedicated to crime in both countries is about the same. This suggests that the commercial imperatives of news sensationalism are at work more than the actual amount of insecurity or rise in crime. This may be especially true in the Mexican newscast Hechos de la Noche on TV Azteca, where 62 of news about crime and public security featured dramatic music, graphics, or camera movement that is associated with television news sensationalism (Grabe, Zhou, and Barnett 2001). Televisa’s El Noticiero used dramatic accoutrements in 11 of its crime news, while Uruguay’s Telemundo used adornments 11 of the time and Subrayado Central used them 3.6 of the time. The within-country agendas of network news fit firm-theory predictions about strategies in concentrated markets; second-tier networks such as TV Azteca tend to increase sensationalism to capture market share (Hollifield 2006, 63). They also fit theories about public networks, although perhaps not as closely as some proponents would hope. Crime and disaster coverage filled 61 of Chile’s commercial network Chilevisión, while politics and government fi lled slightly more than 10. Televisión Nacional de Chile—the only state-owned network in the sample, which also has a reputation as one of Latin America’s few public-oriented state channels—featured crime and disasters in 48 of coverage and politics and government in just under 2. Another possible explanation for the focus on crime also comes from Reis (chapter 3 in this volume). So far, we have seen that prime-time network newscasts reflect the worldviews of owners and other elites. As Reis shows, elites in Brazil view crime as more personally important and threatening than other social issues, such as poverty. To the degree that the elite preoccupation with crime carries across Latin America, this preoccupation could also influence news agendas, either because elite preoccupations are considered a proxy for audience interests or because network journalists themselves are part of the elite. The diversity of figures legitimized in the news by speaking on camera or receiving positive treatment in coverage is even more oriented toward the traditionally powerful sectors in society. Table 4.10 reports percentages of coverage dedicated to the wealthiest three classes and percentage-point gaps between news representations and society.

 

  

 

  

Percentage of all figures in the news who come from top  classes

Percentage of top  social classes in society

  

 

Percentage of all figures treated positively who come from top  classes

  

 

Percentage of top  classes treated positively

Figures treated positively

−. −.

−. −. −.

−. −.

−. −. −.

−. −. −.

−. −.

Figures speaking on camera

Note: Sports, general weather, and international news were not included in this analysis.

Chile Costa Rica Mexico Uruguay Average

Figures receiving positive treatment

All figures

Gaps between upper-class status in society and figures depicted in the news

Chile Costa Rica Mexico Uruguay Average

In news

In society

  

 

Percentage of middle and lower classes treated positively

  

 

Percentage of all figures who speak who come from top  classes

  

 

Percentage of top  classes who speak

Figures who speak

Table 4.10 Class status of figures legitimized by positive treatment and speaking on camera (coding level = news segments in seconds)

  

 

Percentage of middle and low classes who speak

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On average across the four countries, the gap between upper-class status in society and figures featured in the news was an overrepresentation of 49 percentage points for all figures, 62 points for figures treated positively, and 60 points for figures speaking on camera. In Uruguay, for example, the upper classes made up slightly more than 8 of society, 57 of all figures who appeared in the news, 79 of those who were treated positively on the air, and 84 of those who spoke on the air. In Mexico, the upper classes made up slightly more than 8 of the general population, but 73 of the figures featured in Mexican network news and 78 of the figures who spoke or were treated in a positive fashion. If we compare across the two upper-class groupings, 55 of Mexican upper-class figures in the news were treated positively, versus 42 of middleand lower-class figures; 80 of upper-class figures were treated positively in the Uruguayan newscasts, versus 69 of middle- and lower-class figures. As for speaking on camera, in Mexico, 76 of upper-class figures spoke on the air, versus 46 of middle- and lower-class figures. In Uruguay, 58 of upper-class figures spoke on camera, while 38 of middle- and lower-class figures spoke. Across the four cases, 59 of upper-class figures were treated positively, versus 45 of middle- and lower-class figures; 71 of upper class figures spoke on the air, versus 47 of middle- and lower-class figures. Chilean newscast representations were similar to Mexican and Uruguayan content. Costa Rican newscasts have smaller gaps, in part because fewer people overall were treated positively or given a speaking voice on camera. Still, none of the newscasts portrayed upper- and lower-class segments in equal terms or in proportions similar to those in society. The centralization of political and economic life in capital cities has been a cornerstone of Latin American development, and rural areas and secondary cities have been marginalized politically, economically, and culturally in  many countries. Geographic birthplace has become an indicator of life chances (Crespo and Ferreira, chapter 2 in this volume). The geographic diversity of the newscasts reflects geographic power hierarchies that inhibit the resonance of ideas from outside capital cities, as shown in table 4.11. Table 4.11 Geographic diversity: Main location of news segment ()

Chile Costa Rica Mexico Uruguay Average

Capital city

Secondary cities and towns

Rural

Gap: media representation to metropolitan capital city population

. . . . .

. . . . .

. . . . .

+. +. +. +. +.

Note: No foreign news was considered.

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Across the four cases, 77 of the news originated in capital cities, an overrepresentation of 43 percentage points in relation to population. The overrepresentation of stories and actors from capital cities ranged from almost 50 points in Chile to almost 40 points in Costa Rica.

Discussion and Implications It is often said that television and the media generally reinforce the status quo in society by contributing to the acceptance of a certain way of life and thought and by making it appear that particular formations of social relations and the values and assumptions on which these relations rest are based on “common sense” or even are natural (Hallin 1987; Goldman and Rajagopal 1991; McNair 2007, 57–60). In Latin America, this is a status quo of inequality. Our study has found that the underlying messages and symbols of prime-time network television news do not present the actual diversity of society or a level of diversity that could propel change in favor of greater equality, but instead legitimize the ideas and ways of being of society’s traditionally most powerful sectors—government, the upper classes, men, and people of European descent. These are the sectors that benefit from the status quo of inequality. Why does this happen? As Hallin notes, hegemony is a form of ideological power that is embedded in institutionalized practices, routines, and ways of thinking and being. To understand the origins of hegemony, one should therefore understand the institutional structure of the media (1987, 11). In Latin America, media are with few exceptions owned by and operated within vertical family firms controlled by concentrated economic elites that interact in a mutually beneficial way with political authorities (Fox 1997; Mastrini and Becerra 2002, 2006; Rockwell and Janus 2003; Waisbord 2000). Journalists have little autonomy to act independently of owners, and in addition, socialization, role modeling, and rewards and sanctions within and outside newsrooms usually inhibit the formation of values or worldviews resistant to owners’ desires (Hughes 2006; Otano and Sunkel 2003). The owners of Latin America’s dominant media are part of broader economic elites that have benefited from the status quo of inequality and tend to share a worldview that normalizes the current state of social relations. As Menéndez Alarcón states in his study of broadcast television in the Dominican Republic, “Even if television network owners and sponsors compete at the economic level, their basic ideas and philosophy uphold the same model of social organization. These persons tend to consider the present arrangement of Dominican society, in which they are privileged, as the best for their immediate interests. Therefore, they would preserve the fundamental aspects of that society. . . . Although this influence of the dominant groups over the

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ideological content of television is largely indirect, the propositions of television programming in general tend to be in agreement with the kind of social views and structures these people favor” (1992, 157). Anecdotally, what Menéndez Alarcón writes of Dominican television owners seems to apply to many in other countries as well. For example, Mexican network owners joined forces with business elites against the leftist presidential candidate in 2006, believing that his views on economic redistribution were a danger to Mexico. Guatemala’s sole network owner openly says that he supports candidates who share his worldview, especially monopoly control of television. How does media hegemony reproduce itself in Latin America? And how does media hegemony reproduce societal inequality? Our framework of media nondiversity and societal inequality, shown in figure 4.1, depicts how market-dominant news media exercise and replicate political power by combining market dominance with narrow portrayals of ideas, perspectives, experiences, and worldviews in their content to influence media policy making in favor of the status quo in ownership. We begin for clarity’s sake with arrow 1. Media market concentration affects media content. In Mexico and elsewhere, a small number of media owners have used news content, political advertising, entertainment content,

5 Elections and Policy Making

Media Policy

4 1 Lobbying and State Capture

Real and Surrogate Public Opinion

Ownership Diversity

2

Content Diversity

3

fig. 4.1 Equilibrium model of media nondiversity and inequality.

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payments, and other lobbying techniques to keep intact the concentrated broadcast ownership structure. Lawmakers, academics. and business rivals who oppose network initiatives are vetoed or vilified on the airwaves. For example, in one instance, a Senate leader was airbrushed out of a government advertisement (Calleja and Solís 2007; Hughes 2009; Audiffred 2005). Owner-driven journalism cultures in vertical newsrooms affect the political, idea, and demographic diversity reflected in news and other content. The fi rst author of this chapter has documented top-down control structures elsewhere (Hughes 2006, 2007). As many other media ethnographers have found, these structures are rarely coercive, but rather are accepted tacitly by journalists as common sense, instrumentally beneficial, or normatively correct (Gans 2004; Menéndez Alarcón 1992; Breed 1955). As a prominent Mexican journalist says, “Reporters are trained to follow orders.” Empirical studies of media effects show that although media do not act as a hypodermic needle, injecting values and attitudes into viewers, they can affect the worldviews of audience members, especially when audiences view television heavily over time and have few other sources of information. By shaping the diversity of ideas and worldviews to which audiences are exposed, television news and other content can prime audience assessments of important public issues such as crime or poverty, enhance fear or understanding of those different from oneself, frame political candidates as legitimate or radical, aid or restrict citizen learning, and help form the agenda of public discussion and policy making (Gerbner et al. 2002; McCombs and Reynolds 2002; Porto 2007; Roskos-Ewoldsen, Roskos-Ewoldsen, and Carpentier 2002). Priming, framing, learning, idea diversity, and agenda setting influence mass public opinion and attitudes, which in turn are reflected in citizens’ choices about whether and how to participate in elections, as well as whether mechanisms of horizontal accountability (intergovernment checks and balances) and social accountability (alliances of nongovernmental organizations, civil society, and independent media) have an effect on government behavior. At the same time, concentrated and powerful media ownership structures, coupled with heavily mediated politics and weak political accountability measures, allow the owners of market-dominant media to capture the legislative and regulatory process in favor of maintaining a status quo that protects and replicates the concentrated ownership structure. The key to the effectiveness of the lobbying media owners undertake is the idea of surrogate public opinion, in which politicians and policy makers use television news as a proxy for actual public opinion or assume greater public opinion effects than may actually be the case. U.S. research suggests that policy makers’ perceptions of media effects are as important as real, measurable influences because perceptions prompt policy makers to anticipate future media behavior as they make policy decisions and decide how to present them to the

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public (O’Heffernan 1994; Zaller 1994). This is an extremely important point for media effects on policy making. As long as politicians and regulators believe that media have great effects, they will usually act in consequence. At the regional level, Latin American politicians perceive huge media influences on policy making. These include the ability of news coverage to set the policymaking agenda, accelerate the pace of decision making, change the incentives for policy selection, and increase the costs of corruption. A president in the region said, “The media today have a power that can bring down a minister, that can influence a policy, and that is setting the agenda” (PNUD 2004, 165). Similarly, Mexico’s top antitrust official told the New York Times that “there’s nothing strange about responding to media pressure” after the antitrust agency opened an investigation of a pharmaceutical-store chain whose owner had proposed to form a third national television network, threatening the interests of the current duopoly Televisa and TV Azteca. The networks had responded to the threat of a new competitor by criticizing the drugstore chain on the air (Malkin 2006, C3). The real and perceived effects of media content place the owners of Mexico’s Televisa and TV Azteca in a powerful lobbying position. When politicians tried to open the broadcast spectrum to commercial and noncommercial stations through legal reform in 2005, the companies first shut down the would-be reformers. “The lobbying from the broadcast license holders has been unstoppable,” said a Senate sponsor of the failed reform. “They have pressured to the maximum under the argument that we are in an electoral period and that they will be very attentive to the vote of every one of the political parties in Congress. They have spoken to practically every legislator” (quoted in Audiffred 2005). Then, as the 2006 presidential election campaigns began, the networks wrote and successfully lobbied their own reform of the Radio and Television Law. Critics say that the new law granted digital channels without payment, left noncommercial broadcasters in legal and financial limbo, and in a series of moves placed friendly officials on the telecommunications regulatory board Cofetel (Gaytán Alcalá and Fregoso Bonilla 2006). With the ability of market-dominant media to capture the state, a vicious cycle perpetuates the status quo. How might the equilibrium be changed? Shifts in media policy may come from democratic or authoritarian reformers. Venezuela offers one possibility, but one where journalistic autonomy is compromised and nondiversity continues in favor of a rising political power. President Hugo Chávez has invested heavily in state-controlled community media that are loyal to his government while at the same time offering important public ser vices to many poor communities. At the national level, he negotiated with one commercial television network, which critics of the network say no longer criticizes his government, and refused to renew the license of another that failed to make a deal

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(Human Rights Watch 2008; Painter 2007). The owner of a second critical network was charged with criminal defamation in 2010. Another possibility emerges from Uruguay. Under continuous pressure from organized civil society, a center-left congress passed a new community radio law in December 2007, which center-left President Tabaré Vázquez signed. Under this law, thirty-eight licenses have been granted to community radio stations that spent years pressuring the government to legalize their operations. The law created an independent and transparent process for granting the licenses, launched a new broadcast television network under the Ministry of Education and Culture that offers airtime to community productions, and reserved one-third of the digital television spectrum for community television stations. It is an unprecedented law in Uruguay and in Latin America (Gómez 2009, 2010). In thinking about how the reform passed, World Association of Community Radio Operators officer Gustavo Gómez highlighted the constellation of a friendly government with control over the executive and legislative branches, as well as the consistent communication of a political strategy that linked the notion of open access to public airwaves to freedom of expression and human rights and ultimately persuaded commercial network owners that noncommercial media would have little effect on profits. Our framework must be further tested and refined, but on the basis of current evidence it appears that at least the Mexican networks have built a cycle of media dominance that is self-sustaining under present conditions. In Uruguay, on the other hand, reformists were able to modify this cycle. Venezuela represents a path of confrontation in which a state captures, or attempts to capture, media autonomy.

What to Do? Returning to the institutional basis for media hegemony, we argue that the pillars of the media institution in Latin American countries must be changed for prime-time network news to reflect greater socioeconomic diversity and contribute to the creation of more egalitarian forms of social relations. Specifically, greater diversity in the type and concentration of media ownership, as well as greater journalistic autonomy, would increase the likelihood of more diverse media representations of Latin American reality. Public ser vice media systems guided by democratic corporatist mechanisms for allocating media ownership across civic and political groups and liberal market-based systems with moderate levels of competition rather than quasi-monopolies or hypercompetition are found to do better in studies assessing media diversity, competition, and quality (Curran 2000; Hollifield 2006; McKenzie 2005; van der Wurff 2005; van der Wurff and van Cuilenberg 2001).

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In other words, diversity to the point of fragmentation will not work in a freemarket system based on competition, but neither will the level of extreme concentration found in many Latin American systems. As for public media, distribution based on groups in society has worked in Europe. In Latin America, only Uruguay is currently experimenting in a limited way with such a distribution. Most state-owned media in Latin America are propagandistic. Although structures could be created to protect editorial autonomy, on the ground, political controls undermine journalistic independence of these stations (Hughes and Lawson 2005). Research based on media firm theory suggests that news outlets with “moderate” levels of competition produce the highest-quality news, including higher levels of diversity (Hollifield 2006; Lacy 1992; van der Wurff and van Cuilenburg 2001). Hollifield’s work (2006) suggests that the relationship between news quality and level of competition is curvilinear, with optimum levels of quality found in the midrange of competition (see also Lacy 1992). That seems to be the level of competition where organizational financial commitments and innovative business strategies combine to produce the highest quality. Some ethnographers have argued that marketplace credibility forces media owners in concentrated systems to adopt at least “strategic” diversity in news content (León-Dermota 2003; Menéndez Alarcón 1992, 158). For example, in Chile the conservative newspaper El Mercurio reacted to the newspaper La Epoca and other publications in the early 1990s by opening up its news and cultural content to greater ideological diversity, what León-Dermota called “calculated pluralism,” retaining enough readers to contribute to La Epoca’s fall into bankruptcy (2003, 34 ). These authors present the pressure of credibility in the market as ameliorating extreme nondiversity rather than placing diversity in the center of a business strategy or as the fundamental guiding principle of journalistic production. Finally, Hughes’s work on Latin American newsrooms as organizations and institutions suggests that owners, publishers, or television news directors create organizational cultures that enhance or diminish news content diversity (Hughes 2006, 2007; Breed 1955). They do this by institutionalizing a set of cultural norms about journalism and its functions through material incentives, socialization, and role modeling that are rooted in instrumentality (I do this because it benefits me, or because I have to), appropriateness (I do this because it is the right thing to do), and orthodoxy (I do this because it has always been done this way, or I do this without even thinking about it). The normative orientation of those who control vertically structured newsrooms sets the parameters within which content is produced, with greater or lesser degrees of diversity. Combining each of these strands of the literature, we argue that diversity of news content—either in equal proportions or reflective of proportions in society—is diminished when (1) there is too little or too much commercial

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competition, overriding the need for credibility or investment in quality as a business model, (2) a private owner with a narrow worldview sets content standards or politicians control content in ways that work against diversity, overriding journalistic norms in favor of citizenship or social responsibility, and (3) state-owned media lack structural autonomy (fi nancial and in personnel) for newsrooms and turn into propaganda machines for the politician or party in power. What to do? Looking at the media system, Curran argues that we should create externally diverse media systems with differentiated segments of media to serve different audiences (2000, 142–43). The core of his ideal national system would be a public broadcast sector that is broadly reflective and acts as a public forum for debates involving a mass, diverse audience. These core media are supplemented by a civic media sector serving political parties, new social movements, interest groups, and minority subcultures; a professional media sector creating truth-seeking news and socially important entertainment content funded via a public mechanism to allow it maximum autonomy; and a social market sector of media outlets serving minority groups that operate as private enterprises but when needed receive government subsidies distributed in a nonpartisan process. The last group in a diverse media system is media operating in the marketplace and responding to commercial tastes. The commercial media sector would promote system-level diversity because other sectors would likely be more centrist to left politically, while commercial owners tend to be more conservative. This may seem utopian, but any steps in the direction of system diversity would seem useful. Creating a more diverse media structure and enhancing the incentives and autonomy for civic-oriented journalism requires state reform. It means creating the political incentives and state capacity to implement a public-focused media policy that includes both greater diversity in ownership and preserving journalistic autonomy from state control. This is not easy anywhere, but perhaps Uruguay has shown one way it might be accomplished.

Notes 1. Radio is an important source of information and politics, but on the national level television is more important. For example, a seventeen-country study by Latinobarómetro in 2003 (n = 18,670) found that approximately 35 of respondents paid at least some attention to political news in newspapers, 40 to political news on radio, and 59 to political news on television. 2. Data come from IBOPE, 6–24 hours, 28 cities, 2005, reported in the trade publication Conexión Ejecutiva (2006). 3. Televisa is a major stakeholder in the most widely distributed direct-to-home satellite television ser vice available in Mexico. The company also controls about 34 of the cable market through fully owned Cablevisión and stakes in Cablemás (49) and TVI (50) (see CANITEC 2008; Aguilar 2008).

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4. See Lombard, Snyder-Duch, and Campanella Bracken (2002) for guidelines on intercoder reliability. 5. The most obvious reason for the variation in the race gap would be that the percentage of whites in society varies. However, Costa Rica again contradicts an easy explanation. Comparative media studies suggest that the presence of mestizos on Costa Rican newscasts could be part of a business strategy to attract a lower-income market segment. Another issue could be that the Costa Rican race data do not really reflect Costa Rican society. There is no official mestizo category in the Costa Rican census, and the Costa Rican government has historically promoted the construction of a European identity that disavowed mestizaje (Field 2002). We do not have the data or space here to test the causes of these differences defi nitively. 6. Class, of course, is linked by our definition to occupational roles. If we regress gender and race on the most powerful occupational roles in society (government, big business, officials in the police and military, and experts and academics or intellectuals) versus all others, both gender and race are shown to be significant predictors (.000) of whether a person will be depicted in an elite role in society. The standardized beta coefficient for gender is .222 and for race is .201. The variables were weighted by the duration in seconds of news segments in which the news figures appeared. 7. The differences in levels of crime and public security in the two countries are substantiated through a comparison of the U.S. State Department’s Overseas Security Advisory Council, a comparison of murder rates, and the Global Peace Index 2008, which includes indicators of societal safety and security, domestic and international confl ict, and militarization. Mexico is ranked 93rd and Uruguay is ranked 21st out of 140 countries, with higher rankings indicating more peaceful societies (http://www.visionofhumanity.org/gpi/results/rankings.php). 8. We do not speak here about the quality of political coverage. Both Chilean networks have been accused of bias on the part of either the commercial owner of Chilevisión, a billionaire centerright presidential candidate, or the government in office for Televisión Nacional. 9. Treatment, or tone, was coded as positive, negative, balanced, or neutral. Th is analysis considers positive treatment versus all others. 10. Marco Lara Klahr, quoted in Samaniego (2005). Otano and Sunkel say the same thing about Chilean journalists (2003). 11. Personal interview by telephone with Sallie Hughes, Miami and Montevideo, January 5, 2009. See also Waisbord 2009.

References Aguilar, Alberto. 2008. “Nombres, nombres, y . . . nombres.” El Universal Online, November 28. http://www.eluniversal.com.mx/columnas/75407.html. Audiff red, M. 2005. “El reality show de los concesionarios.” La Revista/El Universal, February 12. BBC Summary of World Broadcasts. 2004. “Panamanian Daily Details PresidentElect’s Extensive Media Connections.” June 22. LexisNexis Academic. Bennett, W. Lance. 2003. “The Burglar Alarm That Keeps on Ringing: A Response to Zaller.” Political Communication 20 (2): 131–38. Breed, W. 1955. “Social Control in the Newsroom: A Functional Analysis.” Social Forces 33 (4): 326–35. Calleja, Aleida, and Beatriz Solís. 2007. Con permiso: La radio comunitaria en México. 2nd ed. Mexico City: Fundación Friedrich Ebert–Mexico. CANITEC. 2008. “Distribución del mercado de televisión restringida.” La industria de las telecomunicaciones por cable en México. Powerpoint presentation, slide 16. Comisión Nacional de la Industria de Telecomunicaciones por Cable, México, March. Central Intelligence Agency. 2008. CIA World Factbook. www.cia.gov/library/publications /the-world-factbook.

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Consejo de Investigación de Medios. 2006. Conexión Media Data. http://www.cim.mx /conexionmediadata.html. Curran, James. 2000. “Rethinking Media and Democracy.” In Mass Media and Society, edited by James Curran and Michael Gurevitch, 120–54. New York: Arnold. De Ferranti, D., et al. 2003. Inequality in Latin America and the Caribbean: Breaking with History? Washington, D.C.: World Bank. Estrada, Daniela. 2007. “La comunidad busca aire.” Programa de legislaciones y derecho y la comunicación, November 7. http://legislaciones.item.org.uy/index?q=node/454. Fernández, Claudia, and Andrew Paxman. 2001. El tigre: Emilio Azcárraga y su imperio Televisa. México: Editorial Grijalbo. Field, Les. 2002. “Blood and Traits: Preliminary Observations on the Analysis of Mestizo and Indigenous Identities in Latin America vs. the U.S.” Journal of Latin American Anthropology 7 (1): 2–33. Foro Argentino de Radios Comunitarios. 2007. “La licencia a las Madres un hecho histórico.” Foro Argentino de Radios Comunitarios, December 6. http://www .farco.org.ar/contenido.shtml?fview=182& x=33810. Foweraker, J., and R. Krznaric. 2002. “The Uneven Performance of Third-Wave Democracies: Electoral Politics and the Imperfect Rule of Law in Latin America.” Latin American Politics and Society 44 (3): 29–60. Fox, Elizabeth. 1997. Latin American Broadcasting: From Tango to Telenovela. Luton, U.K.: University of Luton Press. Gans, Herbert J. 2004. Deciding What’s News: A Study of CBS Evening News, NBC Nightly News, Newsweek, and Time. 2nd ed. Chicago: Northwestern University Press. Gaytán Alcalá, Felipe, and Juliana Fregoso Bonilla. 2006. “La ley Televisa en México.” Chasqui: Revista Latinoamericana de Comunicación 105. http://chasqui .comunica.org/content/view/472/1/. Gerbner, George, Larry Gross, Marilyn Jackson-Beeck, Suzanne Jeff ries-Fox, and Nancy Signorielli. 1978. “Cultural Indicators: Violence Profi le No. 9.” Journal of Communication 28 (3): 176–207. Gerbner, George, Larry Gross, Michael Morgan, Nancy Signorielli, and James Shanahan. 2002. “Growing Up with Television: Cultivation Processes.” In Media Effects: Advances in Theory and Research, edited by Jennings Bryant and Dolf Zillmann, 43–68. Mahwah, N.J.: Lawrence Erlbaum Associates. Goldman, Robert, and Arvind Rajagopal. 1991. Mapping Hegemony: Television News Coverage of Industrial Conflict. New York: Ablex. Gómez, Gustavo. 2009. Legislative director of the World Association of Community Radio Operators, Uruguay Chapter, personal electronic communication with author, January 7. ———. 2010. Cómo garantizar la diversidad y el pluralismo en los medios: Aportes para la revisión y reforma de la Ley de Radiodifusión en Uruguay. Montevideo: Friedrich-Ebert-Stiftung. Grabe, Mary Elizabeth, Shuhua Zhou, and Brooke Barnett. 2001. “Explicating Sensationalism in Television News: Content and the Bells and Whistles of Form.” Journal of Broadcasting and Electronic Media 45 (4): 635–55. Graber, Doris A. 2006. Mass Media and American Politics. 7th ed. Washington, D.C.: CQ Press. Hallin, Daniel C. 1987. “Hegemony: The American News Media from Vietnam to El Salvador; A Study of Ideological Change and Its Limits.” In Political Communication: Approaches, Studies, Assessments, edited by David L. Paletz, 3–25. Norwood, N.J.: Ablex.

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———. 2000. “La Nota Roja: Popu lar Journalism and the Transition to Democracy in Mexico.” In Tabloid Tales, Global Debates, and Media Standards, edited by Colin Sparks and John Tulloch, 267–84. Lanham, Md.: Rowman and Littlefield. Hoff man, Kelly, and Miguel Angel Centeno. 2003. “The Lopsided Continent: Inequality in Latin America.” Annual Review of Sociology 29:363–90. Hoff mann-Riem, Wolfgang. 1987. “National Identity and Cultural Values: Broadcasting Safeguards.” Journal of Broadcasting and Electronic Media 31 (1): 57–72. Hollifield, A. C. 2006. “News Media Performance in Hypercompetitive Markets: An Extended Model of Effects.” International Journal on Media Management 8 (2): 60–69. Hughes, Sallie. 2006. Newsrooms in Conflict: Journalism and the Democratization of Mexico. Pittsburgh: University of Pittsburgh Press. ———. 2007. “Explaining Press Performance in New Democracies: The Organizational Imperative.” Taiwan Journal of Democracy 3 (1): 79–97. ———. 2009. “The Evolution of Network News in Mexico: Capturing the Communications Regulatory Regime.” In Empowering Citizenship Through Journalism, Information, and Entertainment in Iberoamerica, edited by Manuel Chávez and Manuel Alejandro Guerrero. Mexico City and East Lansing: Michigan State University/Iberoamerican University/University of Miami. Hughes, Sallie, and Chappell Lawson. 2005. “The Barriers to Media Opening in Latin America.” Political Communication 22 (1): 9–25. Human Rights Watch. 2008. A Decade Under Chávez: Political Intolerance and Lost Opportunities for Advancing Human Rights in Venezuela. New York: Human Rights Watch. http://www.hrw.org/en/reports/2008/09/18/decade-under-ch-vez. International Telecommunications Union. Statistics available at http://www.itu.int /ITU-D/ict/index.html. Kitzberger, Philip. 2010. The Media Activism of Latin America’s Leftist Governments: Does Ideology Matter? Hamburg, Germany: GIGA Research Unit: Institute of Latin American Studies, 151. Lacy, S. 1992. “The Financial Commitment Approach to News Media Competition.” Journal of Media Economics 5 (2): 5–21. León-Dermota, Ken. 2003. . . . And Well Tied Down: Chile’s Press Under Democracy. Westport, Conn.: Praeger. Lizcano Fernández, F. 2005. “Composición étnica de los tres áreas culturales del continente Americano al comienzo del siglo XXI.” Convergencia 38:185–232. Lombard, M., J. Snyder-Duch, and C. Campanella Bracken. 2003. “Content Analysis in Mass Communication: Assessment and Reporting of Intercoder Reliability.” Human Communication Research 28 (4): 587–604. Lozano, José-Carlos. 2006. “Public Policies and Research on Cultural Diversity and Television in Mexico.” Journal of Broadcasting and Electronic Media 50 (3): 467–81. Malkin, Elisabeth. 2006. “Mexico’s Newest TV Drama Is a Bid to Block a Third Broadcaster.” New York Times, December 6. http://www.nytimes.com/2006/12 /06/ business/worldbusiness/06tele.html. Mastrini, G., and M. Becerra. 2002. “Fift y Years of Media Concentration in Latin America: From Artisanal Patriarchy to Large-Scale Groups.” Paper presented at the “Panamerican Colloquium: Cultural Industries and Dialogue Between Civilizations in the Americas,” Montreal, April 22–24. ———. 2006. Periodistas y magnates: Estructura y concentración de las industrias culturales en América Latina. Buenos Aires: Prometeo. Mastrini, Guillermo, Martín Becerra, Trust for the Americas, and Instituto Prensa y Sociedad. 2009. Los monopolios de la verdad: Descifrando la estructura y

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5

Public Opinion on Income Inequalities in Latin America Merike Blofield and Juan Pablo Luna

Introduction It is well established that Latin America has the highest income and wealth inequalities in the world. What has remained less well known is how citizens perceive these inequalities. This is a particularly relevant question after two decades of democratic governance in the region; we would expect some relationship between citizen preferences and government policies. Indeed, in advanced democracies, citizen preferences broadly correlate with government policies and actual levels of inequality. Although democratic transitions in Latin America made public opinion a relevant variable in the policy process, the simultaneous shift to neoliberalism reduced the role of the state in society and broadened the reach of the international market. Neoliberal policies have therefore been implemented in the context of already-high levels of socioeconomic inequality in the region. It is in this context that we examine public opinion toward inequality. Fortunately, as the emergent literature on the relationship between democracy and attitudes toward inequality and redistributive coalitions attests, we are not alone (see Bermeo 2009; Castillo, Mühleck, and Wegener 2009; CEPAL 2009, 38–53; Huber, Pribble, and Stephens 2008; Kaufman 2009). Our chapter has two goals: to map people’s attitudes toward inequality in the region and to examine their determinants. Hence we pose two questions. First, do objective levels of inequality influence people’s attitudes toward inequal ity? Put more concretely: Do people in countries with high levels of inequality have different attitudes as a group toward inequality than people The authors are grateful for feedback from the other chapter contributors at the two workshops held at the University of Miami in November 2007 and May 2008.

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in countries with low levels of inequality? We seek an answer to this question by comparing attitudes between a high-inequality region and a low-inequality region: Latin America and selected OECD countries. The second question follows from the first: What are the individual-level predictors of attitudes toward inequality? Who wants more inequality, who is happy with the status quo, and who wants less inequality? Do the predictors the extant literature identifies for advanced industrialized countries also help explain attitudes in Latin America? Drawing on extant literature and using, again, OECD countries as reference points, we examine whether the same factors influence peoples’ attitudes in Latin America by using three waves of World Values Survey (WVS) data (1995, 2000, and 2005). Our contribution to the emerging literature on democracy and inequality consists of exploring citizens’ opinions on inequality across both time and space. Our main findings can be summarized as follows: In Latin America and over time, we simultaneously find (1) greater societal demands for income redistribution and (2) sustained levels of societal polarization on distributive preferences. These trends coincide with the resurgence of leftist platforms and parties. However, we also find that (3) in comparison with advanced capitalist countries, the relationship between ideology, party choice, and distributive preferences is at best very tenuous in the region (see also CEPAL 2009, 38–53; Kaufman 2009). As a result, our chapter makes two key contributions to the literature on democracy and inequality. First, it challenges the central assumption built into Meltzer and Richard’s (1981) model regarding the automatic translation of social inequalities into political preferences. This finding is relevant because Meltzer and Richard’s model has been very influential in providing the microfoundations for recent theoretical models on democratization (Acemoglu and Robinson 2006; Boix 2003). In short, we show that more inequality does not automatically translate into a median-voter preference for redistributive policies. Second, our analysis shows that structures of political representation (political parties and party systems) act as intervening mechanisms in translating social inequality into political and policy preferences. This has two further implications. On the one hand, high inequality might translate into less instead of greater preference for redistributive policies in countries with weakly programmatically structured party systems (Kitschelt et al. 2010). On the other hand, even within seemingly homogeneous regions, divergent patterns exist in the relationship between social inequality and its political manifestations. These patterns, which we expose only descriptively here, are likely to be caused by divergent causal paths and path-dependent trajectories in each case.

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Describing Public Opinion A solid body of work exists on attitudes toward inequality and redistribution in advanced industrialized democracies. Since the collapse of the Soviet Union and democratization in Eastern and central Europe, several projects have also analyzed citizen attitudes toward economic changes and inequalities in post-Soviet countries specifically. However, little research exists beyond these countries, and virtually no research on the topic exists for Latin America. In advanced industrialized democracies, attitudes toward inequality range across countries from egalitarian preferences in Nordic countries to much higher tolerance of inequality in the United States (see, for instance, Aalberg 2003; Shapiro and Young 1989). In addition, in advanced industrialized countries, redistributive policies correlate with the majority of citizen preferences (Aalberg 2003). We know little about such attitudes in Latin America, where democratic transitions are more recent. Indeed, much of the literature on public opinion in Latin America has focused on attitudes toward democracy. Overall, we know that although Latin Americans prefer democracy to authoritarian rule, they tend to be dissatisfied with democratic performance and distrustful of democratic institutions (see, for example, Lagos 2001, 2008; Latin American Public Opinion Project [LAPOP] series 2004, 2006, and 2008). Some attention has also focused on citizens’ attitudes toward the state’s role in the economy and welfare, both of which underpin their valuation of democratic institutions and performance (Lagos 2008). What might we expect to be the preferences of people in a region where high inequalities have been the lived reality for centuries? On the one hand, given the continuity of high inequalities over many generations (unlike, for instance, the situation in posttransition former Communist countries), we might expect that citizens have naturalized the inequalities and that even poor citizens accept them. Some scholars have referred to this view as the “dominant-culture” hypothesis: poor people accept the dominant culture and their position within it (Aalberg 2003). Marxist scholars have referred to it as “false consciousness.” Indeed, a qualitative study of poor Bolivian schoolchildren found support for this hypothesis: they were more likely than their better-off counterparts to support the status quo (Henry and Saul 2006). On a different level, Alesina, Cozzi, and Mantovan (2009) argue that people’s ideas about fairness in a given society are important predictors of public policy. On the other hand, it makes sense to predict the exact opposite: that the poor will be dissatisfied with the status quo of high inequalities and will want to reduce them. Th is is a straightforward economic analysis (from both a Marxist and a rational-actor perspective): people below the median income seek redistribution, and people above the median seek to avoid it (Meltzer and Richard 1981). Indeed, in addition to high inequalities, Latin American

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countries also have long histories of visible manifestations of dissatisfaction with and rebellion against such elite dominance. Because this is the most dominant and compelling view in the literature (see Acemoglu and Robinson 2006; Boix 2003), we formalize our expectations accordingly. Given this background, we propose the following hypotheses: Hypothesis 1a. We expect citizens in Western Europe and the United States to broadly support the status quo. Hypothesis 1b. We expect less satisfaction with the status quo in Latin America, with the majority favoring more redistribution and a minority opposing it. We expect the majority of the poor and those with income below the median to be cognizant of the extreme inequalities under which they live in Latin America and to want to change them. Along these lines, we also expect the rich minority to want to protect the status quo because it materially benefits them. In addition, we expect that the dissatisfaction of those with income below the median is likely to increase over time as people have more experience of democratic politics, more access to information, and more exposure to alternative views of interpreting reality. At the same time, regardless of whether neoliberal reforms have increased economic growth, it is widely acknowledged that they have not increased social equity. Therefore, we posit the following hypothesis: Hypothesis 2. We expect increasing demands for redistribution over time because democratic politics has allowed for more open debate, while inequalities have remained high. To test these hypotheses, we draw on the available waves of WVS data, including all Latin American countries, as well as a selection of Western European countries and the United States for comparative reference. We draw on WVS data because they provide the broadest publicly available number of countries in Latin America, as well as data over time. In this chapter, although we also present individual-level data on the first wave (1989–90), we essentially draw on data from three waves: 1995, 2000, and 2005. The question we examine in the WVS is one that asks respondents to rate their attitude from one to ten on income inequalities. One states that “incomes should be made more equal,” and ten states that “we need larger income differences as incentives.” An answer of five implies support for the status quo, and a value of one and a value of ten imply radically different views of the role of the state in society and economics. This question differs from others included in regional comparative surveys such as the Latinobarómetro or LAPOP in that it explicitly introduces an alternative to redistri-

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bution (greater income differentials as incentives for growth). Although this might translate into more polarized views, it also has the advantage of avoiding a pro-distributive bias caused by the absence of an alternative that might trigger respondents’ propensity to pay lip ser vice to statements that resonate with normatively more acceptable positions on difficult issues. Moreover, working with the WVS provides the opportunity to compare Latin America with other regions, drawing on the same survey instrument. This also allows a reasonable control for a pro-polarization bias of the income-distribution question we use. If different countries (and regions) present divergent levels of polarization on exactly the same question wording, those differences are unlikely to result from question wording. We present responses to this question across countries in figures 5.1, 5.2, and 5.3, which display a summary of each country’s position in 1995, 2000, and 2005 (or the nearest year of each wave). Both graphs plot the observed country’s average attitudes toward inequality on the 1–10 income-distribution scale against the observed standard deviation on the same variable. For more detail, appendix A provides the frequencies on attitudes toward inequality for each country and time period. Although we draw on linear scatter-plots and refer to correlation coefficients to illustrate the observed relations between pairs of our variables, in principle we use the scatter-plots as a descriptive tool in order to map configurations instead of strictly linear patterns in the data. As figure 5.1 indicates, the fi ndings for 1995 broadly support hypotheses 1a and 1b. In Western Europe and the United States, most respondents cluster around the middle, implying support for the status quo. On the other hand, in Latin America, public opinion is concave: there is very little support for

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the status quo, and most people advocate strong change in either direction, resulting in high standard deviations on attitudes toward inequality. Latin American countries tend to cluster in the right half of the graph, displaying either greater levels of conflict, preferences for greater inequality, or both. As appendix A indicates, for virtually every country in Latin America for which we have data, the median category is either 1 or 10. Indeed, for all the Latin American countries for which we have data, either public opinion is polarized toward both extremes, or there is strong demand in one direction or the other. Relatedly, the data indicate that a sizable sector of the population in Latin American countries would like to see even more income inequalities despite the fact that the region already has the starkest inequalities in the world. This is in stark contrast to Western Europe, where income inequalities are relatively small, but most people seem satisfied with that. In short, countries whose citizens display more egalitarian views are also the ones that display greater social consensus on the issue. The picture we get is somewhat different in figure 5.2, which indicates that as we hypothesized (hypothesis 2), in Chile, Mexico, and Argentina, we see pronounced shifts toward a higher proportion of the population desiring significantly more redistributive policies (number one) through the late 1990s (see also appendix A). Therefore, with the exceptions of Peru and Puerto Rico, Latin American countries show average preferences on inequal ity that are equivalent to those of Eu ropean cases by the year 2000. However, Latin America still shows greater levels of social polarization than Europe on the issue of inequality. Some cases, as that of Mexico, are particularly striking in this regard because a move toward greater equality is accompanied by greater levels of dispersion, indicating deeper polarization over time.

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Figure 5.3 indicates that Latin American countries (aside from Peru) remain polarized on income inequalities, with sizable shares demanding more redistribution, although the average preferences have slightly increased from 2000 levels in Chile, Argentina, and Mexico but are still below 1995 levels (except in Mexico). In Brazil, average preferences have slightly decreased from 1995, while polarization has decreased as well. In sum, in the Latin American countries for which we have data from more than one period, we see increased polarization in attitudes over time resulting from increased numbers of people demanding more redistribution while a minority continues to demand larger differences. The next question we examine is whether there is a correlation between objective levels of inequality and preferences on income distribution. We correlate countries’ Gini scores with the means and standard deviations of the respondents’ attitudes toward inequality. Here, the range for the Gini index is from 1 to 100; the higher the score on the Gini index, the more unequal a country’s income distribution is. Overall, our results indicate that across time, more egalitarian societies tend to have stronger social consensus about income inequalities and redistribution. In more unequal countries, attitudes are polarized, and the general tendency over time seems to indicate growing preferences for redistribution. We summarize our findings for 1995 and 2005 in figures 5.4, 5.5, 5.6 and 5.7. Similar figures for the intermediate measure (for the 2000 wave) are reported in appendix B. In 1995, as figures 5.4 and 5.5 indicate, both the average preference on income inequality (.64) and the degree of polarization observed on this issue in

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a given country (.75) correlate significantly and strongly with the current Gini coefficient of a country. As shown in figures 5.4 and 5.5, more egalitarian societies (essentially European ones) tend to prefer greater levels of income equality and to have less polarized opinions on this issue. This finding is consistent with our expectation regarding citizen preferences and policies in Europe. Figures 5.6 and 5.7 illustrate these results for 2005. For the later periods (including the 2000 wave in appendix B), results are somewhat different. Both correlations in the 2005 wave are weaker. In particular, the average preferences on income distribution do not correlate significantly with current Ginis, and Latin American countries displaying high levels of inequality

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show average distributive preferences that are comparable to those of the most egalitarian societies in the sample, such as Finland. Polarization, on the other hand, still shows a significant and correctly signed correlation, with more unequal societies displaying greater levels of social dissent on the issue. In short, we conclude that in the Latin American countries included in our analysis, which are significantly more unequal, attitudes toward redistribution are polarized, and that this polarization seems to be structural (not contingent on a specific period). Meanwhile, the average distributive preferences have changed to favor greater redistribution in more recent times. These trends seem to resonate well with political events in the region. During the first decade of the twenty-first century we have witnessed an increase in

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starkly opposed preferences among political actors and electoral campaigns, with potentially destabilizing effects (for better or worse) on governance and public policies. Indeed, after a decline in class-based mobilization and demands since the 1980s (Roberts 2002), we may be witnessing a resurgence of more interventionist economic demands. The next question we seek to answer is whether these demands are based on class or on other identifiable characteristics. Explaining Public Opinion

The driving question here is: Within countries, who are the people who want more equality, and who are those who want less of it? Is it a simple story of rich versus poor? Are there identifiable characteristics among those who want more or less equality? Do they change across countries or over time? The percentages in tables 5.5 to 5.11 in appendix A indicate that nonelites also have conservative opinions, at least in some countries, given the sizable share of respondents who seek larger income differences. The extant literature has identified a set of variables that influence attitudes toward income distribution in advanced industrialized countries and former Communist countries (Aalberg 2003; Wegener 2000). They can be divided into sociodemographic variables (particularly class) and ideological variables. Theoretically, the potential impact of socioeconomic class is a straightforward self-interest explanation. People who are above the average in income distribution are less likely to support redistribution because it will cost them materially, and people who are below it are more likely to do so because it will benefit them (Meltzer and Richard 1981). Culture or ideology is also likely to influence people’s values on income inequalities. Scholars have broadly grouped ideological values into two camps: “egalitarian” values and “individualistic” values (Aalberg 2003; Wegener 2000). Those who hold egalitarian values believe that income inequalities should be minimized and that it is the responsibility of the state to do so. Those who hold individualistic values believe in what they see as the free competition of the marketplace and that the state should not bear responsibility for reducing income differentials (Verwiebe and Wegener 2000, 136). Comparative research exists on this topic. Cross-national studies have drawn on the International Social Justice Project (ISJP), which compares attitudes toward redistribution in select post-Communist countries and select advanced democracies, the WVS, which includes countries around the world, and the International Social Survey Program’s (ISSP) Social Inequality II module from 1992 that includes twelve countries. The results of the ISJP project were published in an issue of Social Justice Research (Verwiebe and Wegener 2000). Toril Aalberg’s (2003) book on public opinion toward redistribution across

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industrialized countries draws on extant literature as well as the WVS, and Corneo and Grüner (2002) analyze the determinants of people’s support of governmental reduction of income inequality using the ISSP study. Finally, several studies have focused only on the United States, drawing on U.S. polling data (see, for instance, Alesina and La Ferrara 2005; Fong 2001). All the empirical studies have confirmed the combined importance of both sociodemographic and ideological predictors of attitudes toward redistribution. They find that to varying degrees, both self-interest (as in income) and values influence a person’s attitudes toward inequalities and redistribution (Aalberg 2003; Alesina and La Ferrara 2005; Corneo and Grüner 2002; Fong 2001; Jasso 2000; Örkény and Székelyi 2000; Shapiro and Young 1989; Stephenson 2000; Wegener 2000). They also find, as noted earlier, that Americans are more accepting of inequalities than are Western Europeans, and that citizens tend to get what they want in advanced industrialized countries (Aalberg 2003). Feldman and Steenbergen (2001) identify a specifically American trait in the United States: humanitarians who seek to address the problems of the needy but not to reduce income differentials. For Latin America, we draw on the extant literature and posit some of our own hypotheses. Our expectation is that in Latin America, class and income will predict attitudes toward redistribution: the higher a person’s income is in relation to others within a country, the more supportive he or she will be of income inequalities. This expectation is based on our theoretical assumption of economic self-interest, as well as empirical findings in advanced countries and some empirical support from Latin America. Gaviria (2007, 77–80), drawing on Latinobarómetro data, finds that socioeconomic class is a strong predictor of preference for redistribution. We also expect ideology or values to influence people’s attitudes. Regardless of their class position, individuals are likely to hold values about the ideal society and the role of the state in it. Given this, we also expect different attitudes toward inequality among individualistic- and egalitarianminded people. In general, in many advanced countries, especially in Western Europe, but also in the United States, these values are correlated with an individual’s identification with the Left (egalitarian) or the Right (individualistic). In Western Europe, a history of strong programmatic parties has stabilized preferences along the left-right continuum, and we expect that there will be significant correlation and consistency with an individual’s beliefs in the state, the free market, ideological self-placement, and attitudes toward inequality in that region. In Latin America, we have jointly witnessed three potentially related phenomena: (1) greater demands for income redistribution, (2) sustained levels of polarization regarding the issue of income distribution, and (3) a resurgence

158

elite culture, framing, and public opinion

of leftist platforms and parties. The question, then, is to what degree income preferences correlate with political positions (which are represented in the WVS by the self-reported location on the left-right continuum) and how that correlation has evolved over time. We do know that Latin American countries have a history of weak political parties. Hence we propose the following hypothesis: Hypothesis 3: We expect ideological self-placement on a left-right scale to be less correlated with attitudes toward inequality in Latin America than in OECD countries. We expect this self-placement to be less coherent and stable because of the general weakness (with perhaps the exception of Chile and Uruguay) of programmatic political parties in the region. Parties mobilize more on the basis of clientelistic ties and populist appeals than on alternate programmatic visions (see, for instance, Luna 2006; Roberts 2002; Stein et al. 2006). Therefore, we expect self-placement on a left-right scale to be less meaningful, less consistent and stable, and less likely to be correlated with attitudes toward inequality and redistribution. In turn, regarding sociodemographic variables, we posit the following hypothesis: Hypothesis 4. We also expect that in distinction to Western Europe and the United States, class position will have a stronger impact on people’s attitudes than do their values, especially among the wealthier individuals. We argue that this is due to the social distance that exists between people from different income groups in the region. As discussed in the Introduction to this volume, several political scientists have referred to the “dualist world” (Karl 2000, 153) that income inequalities have created or maintained in Latin America, the corrosive impact this has on fostering a sense of “common belonging” (Vilas 1997, 23), its negative impact on the political position of the social coalitions supporting and backing up the state provision of (goodquality) public goods (Filgueira and Filgueira 1997), and the weakening of a sense of “broad and effective solidarity” (O’Donnell 1998, 55). This social distance between classes may be reinforced by low levels of intergenerational mobility in Latin America (at least in most countries). Hence the upper and middle classes, we expect, will be less likely to see high inequalities as a problem and to identify with the needs of people who live in poverty. What we argue, then, is that egalitarian values among the middle and upper classes are reduced by the social distance between them and the lower classes in Latin America.

Public Opinion on Income Inequalities in Latin America

159

We now draw on WVS data again and first provide a short series of aggregate data analyses structured around the use of simple scatter-plots. Second, we draw on logistic regression analyses to provide individual-level analysis per country. Left-Right Positions and Income Preferences

Incomes should be made more equal (mean, 10 = more inequality)

In figures 5.8, 5.9, and 5.10 we plot the observed correlation at the individual level between left-right positions and income-distribution preferences in a country against the average preference on income distribution obtained for that observation. Figure 5.8 suggests that in 1995 a strong negative correlation existed between the two (–.77). According to this correlation, countries in which income preferences were on average more egalitarian tended to show greater correlations between left-right positions and income preferences. In addition, because egalitarian preferences correlate with egalitarian policies and societies, and as we can see from the country data points in figure 5.8, political preferences and preferences on inequality tended to map more consistently in alreadyegalitarian societies. The relationship between the polarization of income preferences and left-right placements, which we do not report graphically, shows a very similar pattern and correlation (–.73) to the one just described. More interesting is what we see over time (figure 5.9). Although we witnessed an attitude shift in Latin America toward more emphasis on income

8 DR

7

ElSal

Per

PR

6

Mex Ven

Bra Chi

5

Arg U.S.

Spa

Uy

Ger

Fin

4 0.0

0.1

0.2

0.3

Correlation coefficient of income with left-right self-placement

fig. 5.8 Incomes question mean by left-right correlation with income-distribution preferences, 1995. Source: World Values Survey (1995).

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elite culture, framing, and public opinion

Incomes should be made more equal (mean, 10 = more inequality)

redistribution, this greater emphasis does not come with greater correspondence between left-right positioning and distributive preferences. In other words, in Latin America and as of 2000, with the exception of Chile, political preferences do not match substantive preferences on income distribution well. Accordingly, the observed correlation drops to –.35, with the European countries continuing to appear in a position that jointly reflects more egalitarian views and greater correspondence between political and substantive issue preferences regarding social inequality. Figure 5.10 indicates, again, a weaker correlation compared with 1995, at  –.38. OECD countries, aside from Germany, continue to reflect greater

9 PR

8

Per

7 Ven Arg Mex

6 5

Spa

U.S. U.K. Fra

Fin

Chi

4 -0.1

0.1

0.2

0.3

0.4

Correlation coefficient of income with left-right self-placement

Incomes should be made more equal (mean, 10 = more inequality)

fig. 5.9 Incomes question mean by left-right correlation with income-distribution preferences, 2000. Source: World Values Survey (2000).

8.0 7.5 7.0 6.5 6.0 5.5 5.0 4.5 4.0 3.5 3.0

Per U.S.

Mex Bra Chi

0.0

0.1

Ger

Arg

Spa

0.2

U.K. Fra

Fin

0.3

Correlation coefficient of income with left-right self-placement

fig. 5.10 Incomes question mean by left-right correlation with income-distribution preferences, 2005. Source: World Values Survey (2005).

Public Opinion on Income Inequalities in Latin America

161

correspondence between left-right positioning and distributive preferences. In Chile, the correlation weakens, while it strengthens considerably in Argentina and less so in Mexico and in Brazil. Social Distance and Attitudes Toward Inequality

Incomes should be made more equal (mean, 10 = more inequality)

We have argued that social distance between socioeconomic segments will affect preferences on inequality. More explicitly, we have argued that high social distance between the upper classes and the rest of society will correlate with less desire among the elites for income equality. A straightforward operationalization of social distance that is valid on its face is lacking in available surveys. A possible way of generating a proxy for our concept is to analyze the attitudes of upper segments of society (we define those as the ones placed within the top four income deciles for every country) regarding those who are worst-off in society. We considered two such attitudes in particular: social trust and the belief that laziness is what explains poverty. On this basis, we built a single indicator that recovers the percentage of people included in the top four income deciles who jointly display low trust in their fellow citizens and agree with the statement that poverty results from poor people’s laziness. Interestingly, this indicator is significantly correlated with a country’s Gini coefficient (.52). The components used for this index of social distance are jointly available only for the year 1995. Figure 5.11 displays the results regarding income preferences, which are only modestly correlated with our operationalization of social distance (.28). In short, although less egalitarian societies tend to show greater levels of social distance, social distance is only weakly associated with lesser emphasis on income distribution. The correlation of preference polarization with social

8

DR

7

ElSal

6 Spa Uy Ger

5

Arg Mex Bra

Per PR

U.S. Ven Chi

Fin

4 5

25 45 Social distance (percentage of top four deciles)

65

fig. 5.11 Social distance (percentage of those in top four income deciles who say that people are poor because they are lazy while presenting low levels of social trust) by income preference. Source: World Values Surveys.

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elite culture, framing, and public opinion

distance is similar to the weak correlation between social distance and lesser emphasis on income distribution (.3). Therefore, hypothesis 4 is only modestly confirmed by the data, on the basis of a tentative operationalization of social distance that we were unable to replicate for the most current available versions of the WVS.

Explaining Public Opinion on an Individual Level Next we turn to logistic regression models that we run for each country in order to analyze individual-level predictors of attitudes toward inequality across countries and over time. Given that the distribution on our dependent variable does not even begin to approximate a normal distribution (except for a few of the advanced industrialized countries), we find ordinary least squares (OLS) regression problematic. Instead, we truncate our dependent variable and use logistic regression. In addition, we are particularly interested in respondents who exhibit extreme preferences (they are the majority in Latin America), and so we truncate the dependent variable into two categories: 0 for those who answer 1 to 3 on attitudes toward inequality, and 1 for those who answer 8 to 10 on it. We eliminate the respondents who answer between 4 and 7. Here we seek to establish whether individuals with extreme views have identifiable characteristics. We test both self-interest and ideology on attitudes toward inequality. In the first model, we include income, left-right ideology, and trust as independent variables and education, age, and sex as control variables. In the second model, we test two versions of a tentative measure of social distance and exclude income, given the presence of massive collinearity between income and the first (.8 correlation) and second (.6) social-distance operationalizations. Tables 5.1, 5.2, 5.3, and 5.4 summarize the results of the two models over time, first for Western Europe and the United States (tables 5.1 and 5.2), and then for Latin America (tables 5.3 and 5.4). In order to summarize so much information in a few tables, we simply indicate whether a variable is statistically significant and the overall fit of the model. The results in Table 5.1, unsurprisingly, reinforce the findings of extant literature. The two consistent, statistically significant predictors of preference for more and less inequality in Europe and the United States are left-right ideology and self-interest (income); in fact, left-right ideology is the most consistent predictor. However, the significance of the variables fluctuates over time, as does the predictive power of the models. Also, education appears to be significant on occasion as well. Overall, the pseudo-R-squared fluctuates quite dramatically from .03 in the United Kingdom in the mid1990s to .23 in Finland in the mid-1990s.



Education Age Sex Income

**

**



** *

**





**

**

*



**

*

*



** **

* **





**

**



Germany

*

* **



**

**

 *



**

**





**

Spain

** **

*

*



**

* **





**



**

**



**



United Kingdom

**

**







**

**

**

Italy

–**

*





. . . . . . . . . . . . . . . . . . .         ,          

**

**



France

** *



**



. . .   

** *

**



United States

IVs = independent variables; 1 = 1989–93; 2 = 1994–99; 3 = 1999–2004; 4 = 2005–6; 0 = not included in survey. * = p < .05; ** = p < .01; –** = the correlation is statistically significant, but not in the expected direction.

. .  

R N

**

**

* **



Left Trust

*



Finland

Logistic regression model 1, Western Europe and the United States

IVs

Table 5.1

Public Opinion on Income Inequalities in Latin America 163

*

** ** #

**

. 

Left Social distance Social distance 

R N

. 

**

**



. 

** **





. 

** ** **

*



France

. 

** ** **

*





. 

**

**



Germany

. 

** ** *

 –**



. 

**

**



Spain

. 

**



. 

** ** **

**





. 

**



. 

** ** **



United Kingdom

. 

** ** *

 –*



**

**



. 

Italy

. 

**





. 

** ** **



** ** **



. 

United States

IVs = independent variables; 1 = 1989–93; 2 = 1994–99; 3 = 1999–2004; 4 = 2005–6; 0 = not included in survey. # = p < .1; * = p < .05; ** = p < .01; –* and –** = the correlation is statistically significant, but not in the expected direction.

. 

*

 –*

Education Age Sex





Finland

Logistic regression model 2, Western Europe and the United States

IVs

Table 5.2

164 elite culture, framing, and public opinion

. 

**



. 

** **

**



. 

**

*



Brazil

. 

* **

–*



. 

** **





. 

**



. 

**



Chile

. 



. 

** **

 –**



. 

** **

** *



. 

** **



Mexico

. 

* *

**



. 

* **

**



. 

* *



Peru

. 

**



. 



* . 

*



Puerto Rico

. 

** **



Uruguay

. 

* –*



. 

**



Venezuela

IVs = independent variables; 1 = 1989–93; 2 = 1994–99; 3 = 1999–2004; 4 = 2005–6; 0 = not included in survey. # = p < .1; * = p < .05; ** = p < .01; –* and –** = the correlation is statistically significant, but not in the expected direction.

. 

. 

*

* **



Education Age Sex Income Left Trust R N



**



Argentina

Logistic regression model 1, Latin America

IVs

Table 5.3

Public Opinion on Income Inequalities in Latin America 165

. 

**



** ** # . 

**





** ** . 

**

Brazil

** ** * . 





* ** ** . 



Chile

. 

**



** ** ** . 

 –*



** ** # . 

** **



* ** * . 

**



Mexico

. 

* *

**



. 

** *

**



* **



. 

Peru

. 



. 

*

*



Puerto Rico

** ** ** . 



Uruguay

* . 

–*



** * . 

*



Venezuela

IVs = independent variables; 1 = 1989–93; 2 = 1994–99; 3 = 1999–2004; 4 = 2005–6; 0 = not included in survey. # = p < .1; * = p < .05; ** = p < .01; –* = the correlation is statistically significant, but not in the expected direction.

. 

. 

*

** *



Education Age Sex Left Social distance Social distance  R N



**



Argentina

Logistic regression model 2, Latin America

IVs

Table 5.4

166 elite culture, framing, and public opinion

Public Opinion on Income Inequalities in Latin America

167

In table 5.2, social distance in essence replaces the predictive power of income. Indeed, the results in table 5.2 are very similar to those in table 5.1, both for individual countries and over time. The predictive power of the models, then, does not change much if we switch from income to social distance. Moreover, the second specification of social distance, which is somewhat less collinear with income, turns out to be a systematically less efficient predictor than the rival specification. Clearly, then, on the basis of these models, we can only theoretically distinguish between the two and need to explore the relationship between income and social distance further. For now, income alone seems to predict attitudes toward redistribution more strongly than social distance. In Latin America, both income and left-right ideology also emerge as the two most consistently significant predictors of extreme attitudes toward inequality (table 5.3). However, their significance is less consistent across countries and over time, and the predictive power of the models is also weaker overall than in the advanced industrialized countries. Again, education emerges as significant on occasion, and the same dynamic between our measures of social distance is witnessed in this region. Table 5.4 indicates that when we replace income with social distance, the same dynamic happens here as with the model on Western Europe and the United States; social distance captures the statistical significance of income, and the predictive power of the model remains very similar across countries and over time. In short, roughly the same causal patterns show up across regions; both income levels and ideological self-placement consistently are significant predictors of income-distribution preferences at the individual level. However, significant cross-regional differences are apparent, as well as country-specific configurations, particularly in the goodness of fit of our models (greater in Europe and the United States than in Latin America) and the diachronic stability of the observed patterns (stable in Europe and the United States, decreasing in Latin America). To exemplify this point, the average R-squares we obtained for European cases and the United States were .1 for the second WVS wave and .09 for the third wave. In Latin America we obtained an average Rsquare of .05 for the second wave, which dropped to .03 for the third wave. To provide a more nuanced characterization of the existing relationship between preferences on income distribution, left-right self-identifications, and income groups, we now briefly discuss the partial correlations found for this set of variables in a subset of cases from the 2000 wave, including Finland, Chile, Mexico, Peru, Venezuela, Spain, the United Kingdom, and the United States. This subset of cases includes both European and Latin American cases with different levels of objective inequalities and divergent partysystem characteristics. We do not claim that this is a representative sample;

168

Left Incomes Income

elite culture, framing, and public opinion Left 1,000 0.1540 0.0917

Incomes

Income

1,000 0.0775

1,000

Chile

Income-distribution preference

.15***

Left-right

.06*

Income

08*** .08***

fig. 5.12a Partial correlations on income, income-distribution preference, and left-right attitudes: Chile. Incomes = Income-distribution preferences; * = p < .10; *** = p < .01. Source: World Values Surveys.

Left Incomes Income

Left 1,000 0.2952 0.1712

Incomes

Income

1,000 0.1021

1,000

Finland

Income-distribution preference

.28***

Left-right

.05

0 *** 0.15***

Income

fig. 5.12b Partial correlations on income, income-distribution preference, and left-right attitudes: Finland. Incomes = Income-distribution preferences; *** = p < .01. Source: World Values Surveys.

instead of generalizing our results, we are particularly interested in uncovering different possible causal relations among these variables in cases with theoretically interesting characteristics. Overall, this analysis confirms the general findings we have just presented. Although we do not find strong discrepancies between zero- and first-order correlations, we display both in the interest of full disclosure. Whereas zero-order correlations are displayed in regular correlation matrices, partial correlations are graphically presented in a three-variable figure. Figure 5.12 presents our results.

Public Opinion on Income Inequalities in Latin America

Left Incomes Income

Left 1,000 0.0128 -0.1032

Incomes

Income

1,000 0.2132

1,000

Mexico

Income-distribution preference

.06

Left-right

169

.19***

Income

-.11*** ***

fig. 5.12c Partial correlations on income, income-distribution preference, and left-right attitudes: Mexico. Incomes = Income-distribution preferences; *** = p < .01. Source: World Values Surveys.

Left Incomes Income

Left 1,000 0.0675 0.0377

Incomes

Income

1,000 0.0028

1,000

Peru

Income-distribution preference

0.7*

Left-right

0.002

0 03 0.03

Income

fig. 5.12d Partial correlations on income, income-distribution preference, and left-right attitudes: Peru. Income-distribution preferences; * = p < .10. Source: World Values Surveys.

When we compare both regions, the partial correlations between left-right self-identifications and preferences regarding income distribution are stronger in OECD countries (i.e., leftists tend to prefer greater equality). Chile is the only Latin American case that shows a partial correlation that approximates those of Spain and the United States, the two OECD countries showing the weakest coefficients in this subset. To the contrary, and with the exception only of the United Kingdom, where those with higher income levels significantly prefer less redistribution, the partial correlations of income and preferences on income distribution

170

elite culture, framing, and public opinion

Left Incomes Income

Left 1,000 0.1405 -0.0069

Incomes

Income

1,000 0.0508

1,000

Spain

Income-distribution preference

.19***

.05

Left-right

Income -.003

fig. 5.12e Partial correlations on income, income-distribution preference, and left-right attitudes: Spain. Incomes = Income-distribution preferences; *** = p < .01. Source: World Values Surveys.

Left Incomes Income

Left 1,000 0.2281 0.0352

Incomes

Income

1,000 0.1871

1,000

U.K.

Income-distribution preference

.27***

.2***

Left-right

Income -.03

fig. 5.12f Partial correlations on income, income-distribution preference, and left-right attitudes: United Kingdom. Incomes = Income-distribution preferences; *** = p < .01. Source: World Values Surveys.

Public Opinion on Income Inequalities in Latin America

Left Incomes Income

Left 1,000 0.1960 0.0341

Incomes

Income

1,000 0.0584

1,000

171

United States

Income-distribution preference

.19***

.05

Left-right

Income .02

fig. 5.12g Partial correlations on income, income-distribution preference, and left-right attitudes: United States. *** = p < .01. Source: World Values Surveys.

Left Incomes Income

Left 1,000 0.0228 -0.0686

Incomes

Income

1,000 0.1615

1,000

Venezuela

Income-distribution preference

.03

Left-right

.14***

-.07

Income

fig. 5.12h Partial correlations on income, income-distribution preference, and left-right attitudes: Venezuela. *** = p < .01. Source: World Values Surveys.

obtained for OECD countries are weak and nonsignificant. This finding also holds for cases such as Peru and Chile. However, particularly in Venezuela and Mexico, the correlation between income and positions that favor greater equality is negative and relatively strong. In both cases, but especially in Mexico, an interesting pattern defines the relationship among these three variables. Whereas leftist self-identifications

172

elite culture, framing, and public opinion

are negatively correlated with income (i.e., wealthier people tend to align more to the left), income is positively and more strongly associated with negative views on redistribution (i.e., wealthier people tend to oppose redistribution more strongly). In Chile, where income is weakly but still significantly associated with preferences on redistribution, wealthier people align more toward the right. To sum up, this microlevel information seems consistent overall with the macrosocietal trends we discussed in the earlier part of this chapter. However, it also presents country-specific configurations that might be related to different party systems and political trajectories in each case. Such configurations should be the subject of further research.

Conclusions Our fi ndings indicate that European and U.S. citizens tend to be more broadly supportive of the status quo in their countries, while Latin Americans present more polarized views on the issue, with sizable groups either supporting more inequality or asking for more radical redistribution. In addition, the social demand for redistribution seems to have increased in recent times. However, this demand for change does not seem to be as consistently translated into ideological currents or partisan politics as it tends to be in Europe and the United States. In Latin American countries, ideological selfplacement does not map significantly onto different predispositions regarding inequality. Finally, we did not find clear empirical support for our hypothesis on social distance, because the cross-regional differences we found on the predictive power of income and social distance run counter to our theoretical expectations. In other words, with greater levels of support for increased inequality, on average, income and social distance have the same (or less) predictive power on those attitudes in Latin American countries compared to the more egalitarian European cases. However, this is true only for individuallevel data. In the aggregate, and particularly during the mid-1990s, more unequal societies tended to present less support for progressive income redistribution. Taken together, these fi ndings have important implications for thinking about the quality of political representation in Latin America, especially regarding the socially (but not politically) salient issue of income inequality. Our fi ndings suggest that particularly during the 1990s, parties in Latin America failed to represent the socially polarized views that existed in much of the region regarding income inequality. How can we explain these

Public Opinion on Income Inequalities in Latin America

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failures, and what substantive and theoretical implications can we derive from them? Theoretically, the U-shaped distribution we observed in most Latin American cases regarding income-distribution preferences turns this issue into one that is strategically inconvenient for mainstream parties to compete on. As Downs (1957) already noted, the absence of normally distributed issuepreference distributions makes the median-voter equilibrium less likely because it makes it more difficult to craft a winning coalition by moderately mobilizing the issue. Therefore, rational partisan agents seeking a plurality of the electorate should either structure their programmatic appeals on a different set of issues or neglect programmatic competition altogether (i.e., they should compete on nonprogrammatic linkages). Both alternatives are consistent with the empirical evidence we have presented in this chapter on the presence of a highly salient issue around which a great amount of social polarization is observed, but which does not map onto ideological or partisan currents. Moreover, if political agents defy this dominant strategy and choose to compete on the issue of inequality, significant political polarization and turmoil are likely to arise. All these alternative scenarios have important (and rather dim) implications for thinking about the future of inequality and democracy in Latin America. Quite ironically, it seems that where income distribution is most socially skewed, it is more difficult to tackle inequality politically. More egalitarian societies have greater chances of politicizing the issue of inequality and therefore of structuring more consistent representation on distributive issues. These dynamics, of course, are reinforced by the other political processes discussed in this volume. As Reis shows in chapter 3, elites may be concerned about inequality but not view redistribution as a solution. In addition, Hughes and Prado indicate in chapter 4 that media framing may also contribute to less emphasis on problems such as poverty and inequal ity. Campello’s analysis in chapter 6 of the impact of the threat of capital flight on redistributive platforms indicates that even if and when inequality may be successfully politicized, politicians may not respond to citizen preferences for more redistribution. Finally, and importantly, public opinion will be filtered through political platforms, political institutions, and public policies, where many other intervening factors come into play, as chapters 7, 8, 9, 10, and 11 illustrate.

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Appendix A: Attitudes Toward Income Inequality over Time in Latin American Countries Table 5.5

Attitudes toward income inequality, Argentina, 1991–2005 

 Incomes should be made more equal          We need larger income differences as incentives Total Mean Standard deviation

Table 5.6







.

.

.

.

. . . . . . . . .

. . . . . . .  .

. . . . . . . . .

. . . . . . . . 

 (%) . .

, (%) . .

, (%) . .

 (%) . .

Attitudes toward income inequality, Brazil, 1991–2005 

 Incomes should be made more equal          We need larger income differences as incentives Total Mean Standard deviation





.

.

.

. . . . . . . . .

. . . . . . . . 

. . . . . . . . .

, (%) . .

, (%) . .

, (%) . .

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175

Table 5.7 Attitudes toward income inequality, Chile, 1990–2005   Incomes should be made more equal          We need larger income differences as incentives Total Mean Standard deviation

Table 5.8









.

.

.

. .  . . .   .

 .  . . . . . .

. . . . . . . . .

.  . .  . . . .

, (%)  .

 (%) . .

, (%)  .

 (%) . .

Attitudes toward income inequality, Mexico, 1990–2005

 Incomes should be made more equal          We need larger income differences as incentives Total Mean Standard deviation







.

.

.

.

 . . . . . . . 

. . . . . . . . .

. . . . . . . . .

. . . . . . . . .

, (%) . .

, (%) . .

, (%) . .

, (%) . .



176

elite culture, framing, and public opinion Table 5.9 Attitudes toward income inequality, Uruguay, 1996   Incomes should be made more equal          We need larger income differences as incentives Total Mean Standard deviation

. . . . . . . . . .

 (%) . .

Table 5.10 Attitudes toward income inequality, Peru and Venezuela, 1996–2005

 Incomes should be made more equal          We need larger income differences as incentives Total Mean Standard deviation

Peru, 

Peru, 

Peru, 

.

.

.

. . . .  . . . .

. . . . . . . . .

, (%) . .

, (%) . .

Ven., 

Ven., 



.

 . . . . . . . .

.  . . . . . . .

. . . . . . . . .

, (%) . .

, (%) . .

, (%) . .

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177

Table 5.11 Attitudes toward income inequal ity, Puerto Rico and the Dominican Republic, 1995–2001

 Incomes should be made more equal          We need larger income differences as incentives Total Mean Standard deviation

PR, 

PR, 

DR, 

DR, 

.

.

.

.

. . . . .  . . .

.  . . . . . . .

.  . . .  . . .

. . . . . . . . .

, (%) . .

 (%) . .

 (%) . .

, (%) . .

Incomes should be made more equal (mean, 10 = more inequality)

Appendix B: Incomes Question Mean and Standard Deviation in 2000 by Current Gini Coefficients

Per

7.5 6.5 U.K.

5.5 Fra

U.S.

Ven

Spa

Arg

Mex

Fin

4.5

Chi 3.5 25

35

45

55

Gini coefficients, WIDER data set

fig. 5.13 Incomes question mean in 2000 by current Gini coefficients. Sources: World Values Survey (2000) and WIDER (2008).

Societal disagreement on income equality question (std. dev.)

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elite culture, framing, and public opinion

3.8 Mex

3.6 Ven

3.4

Arg

3.2 3.0

Fra

2.6

Chi Spa

2.8 Fin

U.K.

Per U.S.

2.4 2.2 2.0 20.0

30.0

40.0 50.0 Gini coefficients, WIDER data set

60.0

fig. 5.14 Incomes question standard deviation in 2000 by current Gini coefficients. Sources: World Values Survey (2000) and WIDER (2008).

Notes 1. Th is assessment leads us away from seeking to fit a multilevel statistical model predicting variance in attitudes toward inequalities by combining country- and individual-level predictors. In addition, when we were analyzing partial correlations between income, distributive preferences, and left-right self-identifications, we could have relied on multilevel structural equations and a more rigorous causal path analysis. However, if, as we claim, conjunctural causation along pathdependent trajectories is present, modeling distributive preferences on the basis of a hierarchical linear model and/or complex (but still linear) causal relationships on the basis of a multilevel structural equations model could run the risk of hiding causal complexity behind a more sophisticated and parsimonious statistical analysis that would, at best, represent the most frequent linear associations among our independent variables and the phenomena we seek to explain. In short, in this first empirical exploration we trade technical sophistication and parsimony for a more nuanced depiction (we hope) of the multiple and sometimes contradictory causal dynamics shaping the translation of social inequalities into political phenomena. Although our rudimentary empirical exploration is less impressive in technical terms and admittedly less elegant and more tentative than its high-tech alternatives, we think that it does more justice to our theoretical approach. Future analyses could eventually seek to formalize and test our findings in more systematic (but also theoretically consistent) ways. 2. Of course, for nonnormally distributed variables, country averages should be carefully interpreted. More precisely, different countries present heterogeneous variances that make it statistically problematic to estimate the significance of countries’ different average positions. We admittedly run this risk in the remainder of our analysis. 3. For the Gini indexes, we use the first version of the World Institute for Development Economics Research (WIDER) data set, which is no longer available. See WIDER (2008). Mathematically, the Gini ranges from 0 to 1. 4. Of course, there is much normative work on social justice. The key contemporary theorist here is John Rawls (see his 1971 book A Theory of Justice). Here the focus is on empirical analysis of people’s attitudes (although, of course, they are driven by normative underpinnings). 5. We also tested the following hypothesis, Party choice is a good predictor of attitudes toward inequality, with the theoretical expectation that even if left-right self-placements are not strongly tied to preferences on income distribution, party options map onto different predispositions regarding income distribution on the basis of contingent campaign platforms and parties’ short-term strategic mobilization attempts. That is, although largely orthogonal to weakly structured left-right self-placements (hypothesis 3), partisanship might be somewhat related (at least contingently) to

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income-distribution preferences. If this is the case, we could still observe that party choice maps well onto consistently different predispositions regarding those preferences. However, an ANOVA test (using Bonferroni post hoc tests) indicates that the data do not support this claim. Crossregionally we fi nd that European cases and the United States show a much stronger correlation between partisanship and income-distribution preferences. Fewer parties in Latin America seem to have electorates that map differently—with internally consistent and externally heterogeneous views—on the distributive issue. Uruguay might be an exception to this pattern, but we lack more data points to substantiate this claim. We can provide the data upon request. 6. We did run the models on OLS, so we can provide the results upon request. Overall, the results we report here are robust regarding this different model operationalization. 7. The first of these operationalizations is based on an interaction between income deciles and trust, with those who do not trust their fellow citizens carry ing a value of 2 (versus a value of 1 assigned to those who tend to trust their peers). It should be noted that given its greater range (9), income automatically weights more than trust in this fi rst operationalization. The second operationalization of social distance we tried is a dummy variable with values of 1 representing those in the top four income deciles who declared that they did not trust their fellow citizens. Although both measures were included separately in different model specifications, to simplify the illustration of obtained results we merge them together in the same table.

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6

The Politics of Redistribution in Less Developed Democracies: Evidence from Brazil, Ecuador, and Venezuela Daniela Campello

Introduction Most studies of the political economy of income inequality imply that voters’ demand for income redistribution should be a sufficient condition for that redistribution to occur in democratic systems. It is also frequently assumed that redistributive demands should increase as inequality increases, a conjecture questioned by Blofield and Luna in chapter 5 in light of evidence from Latin American survey data. Here I make no explicit inferences about the relationship between inequality and demands for redistribution, or even between voters’ ideological selfplacement and these demands. Rather, I start by arguing that careful analysis of campaign rhetoric in Latin America reveals significant divergence on the issue of income redistribution, and that this divergence is more directly associated with candidates’ ideological positions than analysts usually concede. I therefore take voting for candidates (mostly but not entirely from left-ofcenter parties) who campaign on a redistributive discourse as a proxy for voters’ redistributive demands, and I attempt to demonstrate under what circumstances, even in the presence of such demands, presidents might choose to refrain from advancing redistributive policies. In other words, I rephrase the puzzle proposed in the introduction of this book, asking why twenty years of democratic rule, in which voters frequently elected candidates who promised a redistributive agenda, did not lead to any significant change in the income structure of the most unequal region in the world. The central argument advanced in this chapter is that the fact that democratization occurred in parallel with financial liberalization in Latin America is key to explaining this phenomenon. The increased ease with which

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investors are able to move financial capital in and out of domestic economies imposes severe constraints on incumbents’ capacity to respond to voters’ redistributive demands. This effect is mediated by a series of factors discussed in this chapter, among them the alternative resources available to governments at a given time. The more alternatives governments have, the wider becomes their room to deviate from investors’ preferred policies, and therefore the higher is their likelihood of adopting a redistributive agenda in case they have promised to do so during a campaign. Along these lines, the commodity boom of the early years of the twentyfirst century stands as a crucial factor enabling the newly elected left-wing governments to escape the trade-off between attracting financial investment and redistributing income during these years, as Filgueira and colleagues remark in chapter 8 of this volume. Conversely, the international financial crises of the mid- and late 1990s increased investors’ risk aversion and therefore worked to reduce Latin American governments’ room to maneuver, which might contribute to explaining the widespread adoption of more regressive tax systems in the region, as argued by Mahon in chapter 10 of this volume. In the long term, this reasoning suggests grim prospects for the quality of the regions’ democracies, in accordance with the views of authors such as O’Donnell (1998) and Weyland (2004) and also shared by other authors in this book: political systems where “the range of acceptable policies [is limited] in such a way that inequality and the uneven distribution of opportunities [remain] a dominant feature of the region” (Filgueira et al., chapter 8 in this volume).

Politics and Markets in Open Democracies The relationship between politics and markets is of central concern to political economists. The tensions between capitalist systems, where future welfare depends on investors’ private decisions on how to allocate productive resources, and democratic rule, under which citizens express their preferences about the allocation of resources they do not privately own, have been extensively explored in the academic literature (Lindblom 1977; Meltzer and Richard 1981; Przeworski and Wallerstein 1982; Alesina and Rodrik 1994; Austen-Smith 2000; Bowles 2000; Bjorvatn and Cappelen 2004). Within the neopluralist tradition, Lindblom’s (1977) seminal work states that markets’ automatic resistance to changes that are detrimental to business puts capital owners in a privileged position to influence political decisions vis-à-vis other groups. Attempts to redistribute income or to enforce

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environmental laws that reduce business profits are often faced with investment strikes that do not require collusion or any deliberate intention to punish on the part of market players and are, for that reason, far more effective than labor strikes. Przeworski (1985) poses similar claims from the Marxist perspective, maintaining that on the current realization of capitalists’ interests depends the realization, in the future, of the material interests of any other group in a market society. It follows that the capacity of capital owners to accumulate profits is a necessary—though not sufficient—condition for the future welfare of all other social groups. Both traditions assert that the dependence of the state on capital contributes to explaining governments’ awareness of the effects produced by policy making on investors, regardless of their own ideological leaning. As established by the literature on economic voting (Fiorina 1981; Lewis-Beck 1988; Remmer 1993; Lewis-Beck and Stegmeier 2000; Samuels 2004), economic growth significantly raises the chances that an incumbent or party remains in power in democratic systems. In market economies, in turn, growth depends on private investment and thus on business confidence to invest. Consequently, “even a government that was a perfect agent of wage earners cannot and will not behave much differently from one that represents capitalists” (Przeworski and Wallerstein 1988, 12), and that is what makes the power in the hands of investors structural, not contingent on politics. This structural power constitutes a barrier to further democratic development because it constrains governments’ capacity to respond to voters’ demands whenever they conflict with business priorities (Lindblom 1982; Swank 1992; Mitchell 1997). Marxists also recognized that conflict and expected the tension between capitalism and democracy to pave the way toward socialism (Przeworski 1985). Przeworski and Wallerstein (1982) provide a solution to the dilemma of stable capitalist democracies by arguing that in cases when workers are paid a salary high enough to reproduce capitalist relations, the accumulation of profits can go on continuously, and a capitalist democracy can be an equilibrium. It is worth noting, nevertheless, that this and other early studies of the structural dependence of the state on capital implicitly assumed closed economies and overlooked the effect of capital mobility on this equilibrium. Later studies of financial globalization, however, recognize that increased capital mobility significantly alters the balance of power between business and other social groups, reinforces the structural dependence of the state on capital, and renews the tensions between capitalism and democracy. The position of capital owners becomes clearly more privileged in a world of few controls on cross-border capital flows (Garrett 1998) because the easier it is

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for asset holders to move their capital out of a given country, the stronger become the incentives for governments to implement policies that increase domestic rates of return on investment (Keohane and Milner 1996; Rodrik 2000). Taken to their limit, the constraints imposed by capital mobility could leave governments incapable of satisfying voters’ expectations and unable to respond to citizens’ demands, a situation that eventually could lead to apathy or revolt and pose a real threat to the basic functioning of democratic systems. Boix (2003) formalizes the constraints imposed by capital mobility on voters’ redistributive demands in a game where voters decide how much to tax the wealthy, subject to prospects of capital flight. The author suggests that under high levels of capital mobility, the median voter cannot redistribute as much as is required by high levels of income inequality because this would lead to capital flight and lower the maximum income of the poor. Put simply, Boix’s (2003) model explains the paradox of democracies that do not redistribute, even in the face of high levels of income inequality. What is not sufficiently clear in Boix’s (2003) work is why voters should accept this reduced capacity to tax, especially in the case of highly unequal countries, where significant shares of the population live below poverty lines, while investors fight back whenever they believe they are “overtaxed.” In this chapter, I bring evidence from Latin American politics in order to challenge Boix’s (2003) reasoning. I show that in a relevant number of cases, voters elect candidates who promise a redistributive agenda, and who confront investors during campaigns, displaying no evident concern about capital fl ight. These incumbents, nonetheless, once in office and faced with currency pressures imposed by investors’ exit, are then likely to moderate their position toward redistribution in order to keep capital in the economy. Electoral incentives to promise redistribution allied to the constraints imposed by capital mobility explain, in a scenario of high political and economic uncertainty, the consistent occurrence of policy switches (Stokes 2001) in the region—a pattern that has persisted in Latin American politics since redemocratization.

Income Redistribution and Capital Mobility in Less Developed Democracies Boix’s (2003) work follows standard political economy models in positing that governments are subject to electoral incentives to establish levels of redistribution that maximize the income of the median voter. In his model, for the sake of simplicity, in closed economies these levels are a function of income inequality and welfare losses involved in taxation.

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But as economies become progressively more open, investors’ prospects of exiting domestic markets impose a constraint on governments’ capacity to redistribute income. Under this new circumstance, incumbents need to take into consideration not only levels of inequality but also the preferences of capital owners in order to decide how much to tax and redistribute in a way that maximizes the income of the median voter. According to Boix (2003), the latter scenario provides for a more stable democratic system than the former. Under low capital mobility, instability arises from the fact that the wealthy have strong incentives to fight the poor in order to protect their capital from high taxes, because they do not have the option of exiting the economy. In cases where capital mobility is high, conversely, voters refrain from “overtaxing” the wealthy, and there is no reason to expect class confrontation. One major assumption of Boix’s (2003) model, thus, is that voters are aware of and accept the constraints imposed by capital mobility on governments’ capacity to redistribute income. This assumption might reasonably reflect democracies of the consociational type, where workers and capital owners are organized in encompassing institutions directly involved in policy making, or even mature democracies more generally, where basic social needs have been fulfilled. Nevertheless, it is less likely to describe the reality of developing democracies, where the executive significantly centralizes decision-making power, the democratic practice is still consolidating, social demands have not been met, and citizens’ levels of education, information, and organization are relatively low. In the case of Latin American countries, there is plenty of evidence that voters are mostly unaware of the constraints imposed by capital mobility. That lack of awareness, added to high levels of poverty and inequality, creates strong incentives for candidates to promise income redistribution and to confront capital owners during campaigns. Once elected, however, and under the constraints imposed by currency crises, presidents frequently tend to deviate from campaign promises and switch to a conservative agenda in order to reattract investors to the economy. Policy switches constitute a problem for democracies for many reasons. First, they reflect governments’ incapacity to redistribute income as much as expected by their constituencies, which is a source of frustration. Second, successive betrayals of campaign promises weaken the ties between parties and voters, break electoral accountability, and ultimately delegitimize the democratic system, once voters perceive that their preferences have little effect on policy making. Scholars have pointed to the low quality of Latin America’s third wave of democracy (Weyland 2004) and have suggested that it contributes to apathy and revolt observed in the last decade. Low electoral participation, political instability, and the emergence of leaders from outside

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the political system, as observed in Andean countries in the 2000s, are likely consequences of governments’ persistent lack of responsiveness to voters’ demands. To return to the argument, it is important to note that if both investors and politicians had complete information about one another’s preferences, switches should never occur. If presidents knew exactly how investors would respond to prospects of income redistribution, and investors were clear about how decisive governments really were regarding redistribution, governments’ threats to redistribute more than the level “accepted” by investors given their opportunity costs would not be credible. Thus investors would never flee the economy beyond what governments were willing to accept in order to maximize the income of the median voter, and governments would never be forced to “back down” and “switch.” Moreover, if presidents kept promising to redistribute more than possible and switching every time, their promises would also not be credible to voters, who would not differentiate them from competitors on that issue. Only the fact that some presidents on the left are able to maintain campaign promises, despite investors’ pressures, explains the fact that voters still choose candidates for their redistributive promises. For all these reasons, switches can be explained only on the basis of the existence of some level of uncertainty in voters’, governments’, and investors’ knowledge about one another’s behavior. There are many factors that account for such uncertainty. First, Latin American economies are frequently subject to exogenous shocks that affect the relative power of the state to promote economic growth vis-à-vis the private sector and therefore alter the state’s capacity to influence policy choices. For example, the unprecedented hike in oil prices observed between 2003 and 2007 increased the capital in the hands of the governments of oil-producing countries, as compared with their predecessors, and hence magnified their capacity to foster economic growth irrespective of private investment decisions. In addition, governments’ reduced need for external funding limits creditors’ ability to impose conditions on loans and, through this channel, to influence policy choices. Negative shocks such as the Asian crisis in 1997, conversely, are likely to increase costs of capital to the developing world while reducing export prices and thereby to restrict the resources available to governments in emerging economies and reinforce their dependence on creditors and private investment in promoting economic growth. Exogenous shocks can also alter the relative returns of investment in a given economy as compared with others and affect investors’ willingness to accept higher taxation. When countries are particularly attractive to investment, higher returns compensate for higher taxes, and investors tend to ac-

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cept higher levels of income redistribution in order to remain in the economy. The opposite occurs whenever domestic markets offer lower relative returns. In these cases, only “better treatment” on the part of government, in the present framework reflected in lower taxes, can prevent investors from sending their capital somewhere else. Venezuela provides an example of this logic. The increasing public control of the oil sector and the renegotiation of contracts on unfavorable terms were not enough to prevent most private companies from keeping their presence in the country in the face of an attractive oil market. The Ecuadorean government also managed to raise an investor’s offer from US$320 million to US$480 million under president Correa’s threat of not renewing a telecommunications concession (the asking price was US$500 million). Under a less favorable economic scenario, this initiative would certainly have had a lower chance of succeeding. Changes in relative returns are frequently associated with variations in international costs of capital. Lower international interest rates are likely to make less developed economies more attractive to investment (examples occurred in the 1970s and early 1990s in Latin America), while higher rates in developed countries motivate a “flight to quality” (as happened in the early 1980s and late 1990s). These changes are also caused by alterations in investors’ risk perceptions, such as those that occurred after the Mexican crises of 1982 and 1995. A period of low international liquidity, still in the aftermath of the Argentine default, led risk-averse investors to panic when they were faced with the prospect of a left-wing government in the Brazilian 2002 presidential elections, which might not have been the case under a more positive external scenario. What is noteworthy about all the circumstances mentioned here, thus, is that they reflect factors that are exogenous to domestic economies and are also hard to predict. Uncertainty in Latin America is further produced by political factors, such as low levels of institutionalization and high concentration of decision making in the hands of the executive, and also by the fact that financial integration is a recent phenomenon in the region, where capital markets are still relatively small and asymmetric. For all the reasons presented here, presidents’ resolve to pursue a redistributive agenda and investors’ willingness to remain in the economy in face of that agenda are often miscalculated, which explains the persistence of policy switches during twenty-five years of democratic rule in Latin America. The next section presents preliminary evidence that corroborates my explanation of the fact that leftist governments in Latin America quite often deviate from implementing the redistributive agenda they promoted during campaigns. I start by calling attention to the fact that contrary to Boix’s (2003)

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assumption, numerous candidates in Latin America are elected on the basis of a left-wing discourse and switch to a conservative program only after they are elected. Next, I reveal the relationship between policy switches (the adoption of a neoliberal agenda by left-wing governments) and the occurrence of currency crises and demonstrate that leftist incumbents elected in the midst of such crises are the ones most likely to switch to conservative economic programs. Finally, I show that currency crises are more likely to materialize during elections won by leftist candidates, a fact that points to the association between capital flight and prospects of income redistribution in the region.

Capital Flight, Currency Crises, and Policy Switches In countries representative of Boix’s (2003) model, voters are informed about the motivations of policy making, and on the basis of this information they demand from governments a level of redistribution that maximizes their income. It follows that voters should moderate their redistributive demands as countries become progressively more integrated into the world economy and levels of capital mobility increase. These changes, then, should be reflected in parties’ platforms and lead to an approximation between the programs offered by conservative and progressive candidates while producing the same trend in policy making. The scenario contemplated in Latin America in the period that follows redemocratization is quite distinct from the one just described. While figure 6.1(b) evidences the convergence of governments’ agendas predicted in Boix (2003), figure 6.1(a) can hardly support the claim that this convergence reflects voters’ preferences. In thirty-two out of eighty-nine elections that have taken place since 1978, voters chose candidates whose programs rejected neoliberal policies and offered higher social spending and income redistribution, in what here is coded as a left-wing campaign. Among all Latin American presidents elected on that promise, however, only 40 effectively followed this platform after inauguration. Table 6.1(a) reinforces this evidence. It reveals a high association between parties’ ideology and campaign discourse, but this correlation ceases to exist between party ideology and policy choices. Table 6.1(b) shows that less than a third of all the parties recognized as left of center adopted a program that could be characterized this way. On the basis of these data, students of Latin American politics contend that although the 1980s initiated a period of economic liberalization and democratization in Latin America, liberalization has not always occurred through democracy (Haggard and Kaufman 1995). In a significant number of Latin American elections, voters effectively chose candidates for their offer of a

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Left

Campaign

Right

(a) Campaign discourse

CRI82 ECU84 ELS84 URU84 BOL85 GUA85 HON85 DOM86 MEX88 BRA89 CHI89 HON89 CRI78 PER80 COL82 DOM82 ARG83 VEN83 PER85 COL86 CRI86

ELS89 URU89 COL90 DOM90 GUA90 ECU92 BOL93 CHI93 BRA94 DOM94 ELS94 MEX94 ECU88 VEN88 ARG89 BOL89 CRI90 PER90 HON93 VEN93

URU94 ARG95 GUA95 PER95 DOM96 NIC96 BOL97 HON97 BRA98 COL98 CRI98 ECU98 CHI99 COL94 CRI94 ECU96 ECU98 VEN98 ARG99 DOM00 VEN00 BRA02 ECU02

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ELS99 GUA99 URU99 MEX00 HON01 NIC01 PER01 BOL02 COL02 CRI02 GUA03 DOM04

Left

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Right

(b) Policy choices

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VEN00 ARG03 BOL05 ECU06 VEN06

CRI82 ECU84 ELS84 URU84 BOL85 GUA85 HON85 DOM86 MEX88 BRA89 CHI89 HON89 PER80 COL82 DOM82 CRI86 ECU88 VEN88 ARG89 BOL89

ELS89 URU89 COL90 DOM90 GUA90 ECU92 BOL93 CHI93 BRA94 DOM94 ELS94 MEX94 CRI90 PER90 HON93 CRI94 ECU96 ECU98 VEN98 ARG99

Left

ELS04 URU04 CHI05 HON05 BRA06 COL06 CRI06 MEX06 PER06

Right Government

fig. 6.1 Policy switches in Latin America. Source: Author’s coding of campaign and governments, following Stokes’s (2001) criteria.

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Table 6.1 Correlates of party ideology (a) Party ideology versus discourse

(b) Party ideology versus policies

Campaign Party ideology Left Right

Left

Right

 

 

Policies Party ideology Left Right

Left

Right

 

 

Note: These tables associate party ideology with campaign discourse and policy choices. They display the number of parties classified as left (left and center-left) and right (right and center-right) that campaigned on a left- or right-wing discourse (table 6.1a) and implemented a left- or right-wing program once in office (table 6.1b).

left-of-center agenda that was abandoned for a neoliberal program right after inauguration, a phenomenon dubbed neo-liberalism by surprise (Stokes 2001, 1). Now that we have established the regularity of policy switches, the next step consists in identifying the determinants of presidents’ decision to switch. Stokes suggests that candidates and voters have divergent beliefs about what set of policies is conducive to improvements in voters’ welfare. Because of that divergence, candidates are inclined to promise whatever program maximizes the chances of winning the contest and, once in office, to implement their preferred policies, expecting that voters will “forgive” the betrayal of campaign promises in the face of good economic results. That might indeed be part of the explanation, but it overlooks the matter of where candidates’ beliefs come from and begs the question of why we do not observe switches in both directions (not only left to right but also right to left) if they are just a matter of diverging preferences. Unidirectional switches convey that there is some intervening factor, not accounted for in Stokes’s (2001) theory, that explains why only leftist candidates deviate from their campaign promises. Figure 6.2 displays what I claim to be the intervening factor that is missing in Stokes’s explanation. It indicates that 74 of policy switchers were elected in the midst of a speculative attack  (elections marked in gray), as compared with 38 in the case of nonswitchers. Moreover, it shows that speculative pressures during elections are more likely to occur when the winner is a left ist candidate (60 versus 40 of neoliberal campaigns). Th is evidence is compatible with the argument, stated previously in this chapter, that prospects of increased income redistribution are likely to produce capital flight that, if turned into significant currency pressures, forces incumbents to deviate from their campaign promises and to implement policies closer to investors’ preferences. The next sections introduce the cases of Luiz Inácio Lula da Silva in Brazil, Lucio Gutiérrez and Rafael Correa in Ecuador, and Hugo Chávez in Venezuela

Left

Campaign

Right

The Politics of Redistribution in Less Developed Democracies

CRI78 ARG83 VEN83 PER85 COL86 VEN93 COL94

VEN00 ARG03 BOL05 ECU06 VEN06

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Left

URU94 ARG95 GUA95 PER95 DOM96 NIC96 BOL97 HON97 BRA98 COL98 CRI98 CHI99 DOM00 BRA02 ECU02 NIC07

ELS99 GUA99 URU99 MEX00 HON01 NIC01 PER01 BOL02 COL02 CRI02 GUA03 DOM04

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ELS04 URU04 CHI05 HON05 BRA06 COL06 CRI06 MEX06 PER06

Right Government

fig. 6.2 Policy switches and currency crises. Source: Author’s coding of campaign and governments, following Stokes’s (2001) criteria. Exchange market crises calculated using World Bank data and follows Leblang (2002).

as illustrations of the mechanisms that lead to policy switches, and of the circumstances under which capital mobility reduces leftist governments’ room to implement a redistributive program.

Lula: A Leftist Trapped Between Walesa and Allende The Brazilian presidential election of 2002 provides a paradigmatic case for the analysis of the political consequences of capital mobility, illustrating quite well the mechanisms that associate the prospects of a “turn to the left” in government, capital flight, and policy switches. Early in the campaign year, both national and international market players praised the country’s “sound economic conditions,” and fi nancial analysts’ reports stressed the substantial decoupling between the Brazilian and Argentine economies (Santiso and Martínez 2003). In March 2002, while Argentina was in the midst of unilateral debt renegotiations, Brazilian central banker Armínio Fraga was elected Man of the Year by LatinFinance Magazine and was dubbed “the man who saved Brazil.” In this period, despite concerns about Brazil’s high indebtedness and persistent current account deficits, the country’s economic prospects seemed promising in the medium to long term.

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By late April, however, the Brazilian currency had slumped, while the risk premium on the country’s bonds rose to Nigerian levels, among the highest in the world. The crucial change that occurred in that period was the release of the first opinion polls revealing that President Fernando Henrique Cardoso’s candidate was not likely to win the presidential elections (Santiso and Martínez 2003). At the end of May, BCP Securities issued a report titled Da Lula Monster that described the sense of panic spreading among economic agents as they realized that Lula would win the election. The fear associated with the candidate reflected the expectation that he might discontinue Cardoso’s economic policies, increase the government’s social expenditures, and even default on the country’s massive foreign debt. Investment banks published frequent reports on the details of the Workers’ Party program, and Goldman Sachs developed a Lulameter—a mathematical model designed to quantify the likelihood of Lula’s victory through the behavior of prices in currency markets. The reaction of financial markets, reflected in stock and bond markets alike, brought foreign capital flows to a halt and caused a sharp cut in credit lines for the Brazilian government and companies (figure 6.3). In July 2002 outflows reached US$1.1 billion, twice as much as in the previous month. The devaluation of the Brazilian real led to a significant boost in the country’s foreign debt ser vice of US$335 billion, 80 of which was linked to the dollar or accumulated interest at floating exchange rates. Inflation also reached 1.7 in July, compared with 0.4 in June, leading to a widespread belief that the Brazilian stabilization process might be jeopardized in 2003. One way to grasp the singularity of the 2002 election is to compare stock markets’ behavior with the behavior observed during the presidential election 2,000

Lula wins first round

1,800 1,600 1,400 1,200 1,000 800 600

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fig. 6.3 Evolution of Brazilian country risk, 2002 election. Source: Global financial data.

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of 1994, when Cardoso was elected in the first round after initiating market reforms as finance minister in the previous government. While the Standard and Poor’s stock-market index for Latin America rose 25 from January to October 1994, the same index for the Brazilian stock market jumped 94 in the period, compared with –8 for Latin America and –52 for Brazil during the 2002 campaign. Lula’s team was quick to complain that markets were “fueled by exaggerations” and to assert that once elected, the president would appoint a credible economic team in order to calm investors. On the government side, both Armínio Fraga and Pedro Malan, the incumbent finance minister, called on the Workers’ Party to clarify its commitment to market-friendly policies and fiscal discipline. The effort to assure continuity in economic policies, despite voters’ apparent mandate for change, culminated in an IMF agreement offered with the explicit goal of “calming down markets.” In September the IMF approved a new US$30 billion loan to Brazil to be paid out by the end of 2003, while the World Bank announced its intention to lend US$7 billion to the country in 2003. In return for the IMF loan, the government was asked to maintain a primary budget surplus (not including debt payments) of at least 3.7 of GDP during 2003 and to keep the same target in the budgetary guidelines of the following two years. The government also made a commitment to accept the IMF’s quarterly surveillance of budget data and to maintain a set of current free market policies in the future. The massive rescue package was primarily aimed at restoring investors’ confidence in the Brazilian economy, but it also had a clear political agenda—to provide incentives for the incoming administration to maintain the status quo in economic policies and to bind it to do so. The IMF’s offer constituted a “reality check” for the Workers’ Party; all potential winners of the electoral race were publicly asked to commit to the IMF’s terms, and they did so. Not only investors worried about Lula’s election; the U.S. government associated the prospects of a Workers’ Party government with a slowdown of the renegotiations of the Free Trade Agreement of the Americas (FTAA), President George W. Bush’s major foreign policy goal in Latin America. Peter Hakim, president of the Inter-American Dialogue, confessed to worrying that international jitters resulting from a Lula presidency could lead to “an Argentine-style collapse” in Brazil and the “possibility of a contagion effect throughout Latin America” (Associated Press, October 5, 2002). Nonetheless, Hakim claimed that Lula, once elected, could help calm markets depending on what he did in the run-up to the government’s inauguration and his first few days in office, particularly concerning the appointments to head the central bank and the finance ministry. Hakim contended that worst-case economic scenarios could be avoided if Lula pursued a moderate course and

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Washington showed a willingness to work with him. “Market ner vousness would dissipate with a few words of confidence early on by Treasury Secretary Paul O’Neill. That would be reassuring and markets would put up new money without worrying that the whole thing is going to collapse” (ibid.). In order to bring the economy back to its condition at the beginning of 2002, Lula dedicated the first year of his term to assuring the markets about the president’s “responsibility” and intention to respect contracts and to avoid a default on the country’s debt. The effort finally seemed to work, because markets boomed already in the initial months of the new government. Table 6.2 provides an illustration of the “confidence-building process” characteristic of Lula’s early term—the way the new government managed to improve its stand with investors already during its first year in office by implementing reforms long demanded by markets. It displays “reform scorecards” for the Brazilian economy, created by Merrill Lynch, in which the country was assigned a score based on the progress and quality of reforms analysts deemed Table 6.2

Brazil’s Merrill Lynch reform scorecard (a) April 

Reform

Change

Recent development

Quality

Progress

Total

Social security Tax reform Central bank autonomy Banking law

Neutral Neutral Positive

Presented April – Presented April – Final vote mid-April

. . .

. . .

. . .

Neutral

Already in Congress

.

.

.

.

.

.

Composite score (b) December  Reform

Change

Recent development

Quality

Progress

Total

Social security

Positive

.

.

.

Tax reform

Positive

.

.

.

Central bank autonomy Banking law

Neutral

Approved in Senate, nd round Approved in Senate, st round Complementary law expected  Approved in Lower House

.

.

.

.

.

.

.

.

.

Neutral

Composite score Source: Merrill Lynch, referred to in Santiso (2006).

Notes: The scorecard summarizes the progress score, which ranges from 0 to 5, 5 being the closest a reform is to being approved. The quality score, also ranging from 0 to 5, measures the closeness of a reform’s “current form” to what is considered its “best form.” The composite score gives the weighted score of the reforms with the following weights: social security, 50; tax reform, 25; banking law, 15; and central bank autonomy, 10.

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necessary (how close the current state of a given reform was to its “ideal” form). The difference between Brazilian scores in April (table 6.2a) and December 2003 (table 6.2b) contributes to explaining markets’ recovery during Lula’s first year in office. Unfortunately, this process left the Brazilian economy nowhere close to where it had been in early 2002. In March 2002 inflation accumulated during the previous twelve months stood at 7.5. In April 2003, however, it was above the 15.0  mark. The basic interest rate in that period stood at 26.5, compared with 18.0 one year earlier. Important sectors of the economy that had debts pegged to the dollar, such as the electric power companies, were left in dire straits. Also, because of a high share of dollar-denominated debt, public accounts deteriorated in the period. With the purpose of accomplishing the fiscal results demanded by the IMF, the government cut social spending, increased interest rates, and furthered fiscal conservatism, increasing the primary surplus from 4 to 5 of GDP during a period of economic stagnation. Lula went so far as to approve a social security reform that, among other measures, taxed retired public employees, and that had been rejected under the previous administration exactly because of the Workers’ Party’s vehement opposition. As a result, after an average annual growth of 0.7 in the previous four years, Brazilian per capita income fell 0.3 in 2003, while the share of the poor in the population rose 1.2 percentage points in the same year, the highest in a decade. Unemployment, which had averaged 8.0 between 1999 and 2002, reached 9.2 in 2003. Lula’s policy switch, while producing frustration among the party’s traditional allies and even the exodus of party members, produced euphoria among market players and made Lula an example of a “responsible left” for other presidents elected in South America, such as Chávez in Venezuela, Néstor Kirchner in Argentina, Tabaré Vázquez in Uruguay, and Juan Morales in Bolivia. In the words of Myles Frechette, U.S. consul general in São Paulo from 1988 to 1990 and then president of the Council of the Americas in New York, “There’s an enormous sense of relief that Lula, despite the rhetoric of his party, has people who understand how the global economy works, and they want to be players” (Ottawa Citizen, April 18, 2003).

Gutiérrez, Correa, and the Impact of Oil Prices in Ecuador After presenting the mechanisms that associate capital fl ight and policy switches, this section focuses on the effects of exogenous shocks on investors’ capacity to influence policy making by comparing the successive elections of Lucio Gutiérrez and Rafael Correa in Ecuador. These two candidates won the

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elections as left-wing outsiders, and in both cases financial markets displayed panicked reactions when faced with the prospect of their victory, reflected in the behavior of Ecuadorean country risk. The influence of investors’ reactions on the presidents’ policy choices varied substantially, though, and cannot be explained without reference to the international economic scenario that prevailed in each case. When Gutiérrez won the presidential election of 2002, Ecuador was a highly indebted economy. Oil, the country’s main export product, was negotiated in international markets at historically low prices. Additionally, by that time investors demonstrated a generalized risk aversion toward emerging economies, following the Argentine default and the election of a sequence of left-wing governments in Latin America. In 2006, conversely, Correa was inaugurated in a country where the debt burden had been consistently lowered and oil prices had reached historically high levels, and at a moment when portfolio managers were eager to invest in emerging economies. From a political perspective, between the two elections the credibility of the Ecuadorean political system had further deteriorated, a process that had been going on for years (Pachano 2005) and that strengthened support for an outsider like Correa to implement radical economic and political changes. Table 6.3 displays the main economic indicators during each election. Lucio Gutiérrez was a retired colonel, leader of a coup that allied indigenous movements and the military to successfully oust president Jamil Mahuad in 2000. Already released by the president in charge, Mahuad’s vice president Alfredo Palacios, in the 2002 election Gutiérrez ran as an outsider, was popular among Ecuador’s indigenous population, and had the support of a small Marxist party, the Movimiento Popu lar Democrático (Democratic Popu lar Movement), radical indigenous movements (represented in the Confederation of Indigenous Nationalities of Ec uador [CONAIE], the Table 6.3

Economic indicators in two Ecuadorean elections

Indicator External debt/GDP Public external debt/GDP Foreign exchange reserves (US$billion) Short-term/total external debt Oil price (US$/barrel) EMBI+ spread emerging markets

Gutiérrez ()

Correa ()

. . .

. . .

. . 

. . 

Source: Ecuador Central Bank. EMBI+ = JP Morgan Emerging Markets Bond Index.

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Ec uadorean indigenous nationalities confederation), and left ist-led unions. The coalition was named January 21 Patriotic Movement after the date of the attempted coup. During the first round of the presidential campaign, the candidate, who claimed to be an admirer of Fidel Castro and Hugo Chávez and wore green army fatigues in his public appearances, was one of the most outspoken critics of Ecuador’s adoption of the U.S. dollar in 2000. Amid his main projects, Gutiérrez proposed the establishment of a “debt club” in order to coordinate the restructuring of Latin American foreign debt and explicitly rejected what he called “neoliberal globalization or any form of external intervention of international groups or foreign powers” (Party manifesto of the January 21 Patriotic Movement). In his public speeches, Gutiérrez emphatically rejected market reforms previously implemented in the country and promised to increase social spending in order to reduce income inequality and improve the conditions of the 60 of Ecuadoreans considered poor. He went so far as to say that Ecuador’s enemy was “the enemy of all Latin Americans: neoliberalism,” and he asserted that his candidacy was “the hope of the poor, the marginalized, the excluded” (ibid.). Gutiérrez also affi rmed that entering the FTAA would be suicidal for Ecuador in the short term because the country was not in a position to compete with bigger neighbors. The candidate used such terms as “fighting American neocolonialism” in his discourses and insisted on the need to achieve a “second independence” in Latin America, expressing his intention to revoke permission for the operation of an American military base in Ecuadorean territory (Manta). The prospect of Gutiérrez’s election provoked a decrease of more than 30 in the price of government bonds in the six months before the election, along with a rise of more than 22 in bond yields, higher only than postdefault Argentine bonds (figure 6.4). Increased interest rates usually follow higher risk perceptions on the part of investors, with serious consequences not only for governments but also for the local private sector. According to a leading Ecuadorean economist, in 2002 each 1 increase in interest rates cost the government the equivalent of all the cocoa revenues for the year in a country as indebted as Ecuador. Investors’ panic stemmed from the perception that the election in Ecuador was following recent trends in Venezuela, Brazil, Peru, and Bolivia in a regionwide shift to the left in Latin America. This shift could mean, already in the short term, the reversal of the market reforms and privatizations that had characterized Latin American economies since the mid-1980s, as well as an increased risk of default on the country’s public debt. In the words of

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fig. 6.4 Evolution of Ecuadorean country risk, 2002 election. Source: Global financial data.

Francisco Proano, president of the Ecuadorian American Chamber of Commerce, investors were “looking for judicial security, the beginning and end of everything, and any move from legal or contractual outline on the part of government is going to involve a dangerous instability” (United Press International, November 26, 2002). Providing another interpretation of the potential instability to be faced by Gutiérrez if he were elected, an Ecuadorean analyst stated that it was the divide between the rich and poor that Gutiérrez should bridge if he was to succeed as president—“The message is more or less clear: if there isn’t understanding between these two big inclinations, the country will continue to walk in the shadow of destabilization” (Felipe Burbano de Lara, Öconos magazine, December 2002). The confidence crisis that emerged among investors contributes to explaining the radical shift that Gutiérrez endured in the second round of the presidential campaign. Immediately after his favoritism was confirmed in the first round, the candidate replaced his uniform for a business suit and visited Miami, Washington, and New York, meeting with IMF officials, fi nancial analysts, and academics. In the presence of potential financiers, Gutiérrez guaranteed that his country would continue with the dollar as its currency and would meet its debt obligations to multilateral lenders; he also revealed intentions to negotiate a new deal with the IMF and radically departed from his rhetoric during the first phase of the campaign. The second round of the election was marked by a discourse in which Gutiérrez downplayed the conflicts he highlighted in the first round. To his commitment to increase social expenditures, Gutiérrez added that he would maintain fiscal discipline and develop an economic plan that would meet the

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IMF’s requirements and be attractive to investors. After promising to prioritize paying the “social debt,” the candidate explicitly pledged to do so without defaulting on the public debt. The motto of Gutiérrez during the second round was that “if we are going to distribute wealth, we have to generate wealth,” which accurately illustrates the dilemma incumbents face between voters’ demands for income redistribution and the need to provide positive incentives to investors. The economic conditions Ecuador faced at that time, however, left Gutiérrez with little room to accommodate both demands. If some analysts still doubted Gutiérrez’s commitments to “sound policies,” the trip to Washington was overall perceived as a successful signal of the candidate’s intentions and was pointed to as the reason that Ecuador was able to avoid a crisis of “Brazilian proportions.” Although the evolution of the country’s risk premium during the campaign communicated investors’ expectations regarding a future Gutiérrez government, his trip was a gesture explicitly aimed to calm markets with respect to his presidency. According to a political leader from an allied party, Gutiérrez’s “policy switch” was also influenced by campaign financiers, who warned the candidate about the potential consequences of his leftist platform for investment in the country. It was also during the second round that Gutiérrez invited Mauricio Pozo, an orthodox economist well regarded among investors, to advise his economic team. Pozo’s later appointment as Gutiérrez’s finance minister worked as the final assurance to the markets that the government would follow an orthodox agenda. The changed tone toward investors was also accompanied by a changing relation with the indigenous movements that formed the basis of Gutiérrez’s support in the first round of the 2002 election. For instance, already in the second round Gutiérrez kept a mostly indigenous crowd of 1,500 waiting for six hours, only to deliver a fifteen-minute speech against his opponent in which he hardly mentioned the Pachakutik movement. Any skepticism investors might still have had about Gutiérrez’s intentions proved to be unfounded after his victory in December 2002. Right after his inauguration, Gutiérrez announced the signing of a US$20 million agreement with the IMF, which enabled the country to secure an additional US$300 million from the World Bank, the Inter-American Development Bank, and the Andean Development Corporation (Hurtado 2006). In the agreement, the government committed to maintaining dollarization and creating inflation targets, raising oil prices, eliminating subsidies on cookinggas prices, granting the provision of public ser vices to private concessions, assigning all oil revenues above and beyond those estimated in the budget to servicing the country’s foreign debt, and to a wage freeze, among other policies requested by the IMF and in evident opposition to the redistributive

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promises made early in the campaign. Gutiérrez also proclaimed that Ecuador would be the United States’ best ally in the region and reaffirmed the American military presence in the military base of Manta. As soon as the Gutiérrez government’s agenda was disclosed, leaders of indigenous movements started to demand the removal of the finance minister and the revocation of the agreement with the IMF and of all the policies on which it was conditional. Protests and marches marked the rupture of the indigenous movements with the government, and Gutiérrez ended up building a coalition with right-wing parties that finally consolidated his policy switch. When Gutiérrez was ousted in 2005 on accusations of corruption and attempts to control the Supreme Court, the Ecuadorean economy had grown an average of almost 6 since 2003, while the country’s income inequality had remained unchanged from 1998 levels. Correa’s experience, despite starting in 2006 in a very similar way to Gutiérrez’s, has been moving in a quite different direction since then. Previously an economics professor and holding an American PhD, in his short period as Palacios’s finance minister Correa diverted part of the funds Gutiérrez had assigned to debt payments to government expenditures, confronted the World Bank, and was an outspoken critic of the IMF and the country’s debt management. These initiatives gathered the support of workers and indigenous movements, which launched a series of protest marches when Correa resigned after only three months with popularity higher than the president’s (57.4 to 38.1). Correa’s last press conference was claimed to look much like a political gathering, including representatives of labor organizations such as the umbrella Federación Unica de Trabajo and the Central Ecuatoriana de Organizaciones Sindicales Libres; the Confederation of Indigenous Nationalities of Ecuador (CONAIE); and the anti-FTAA group Ecuador Decide. A year later, Correa ran for president as an antineoliberal, antiestablishment candidate, portraying a discourse comparable to Gutiérrez’s in 2002. Unlike Gutiérrez’s, though, Correa’s trip to the United States during his campaign was aimed at telling a group of Wall Street analysts and investors that he would consider an Argentine-style debt restructuring if he were elected president (Latinnews, September 14, 2006). He also referred to dollarization as “the biggest mistake ever committed in the economic management of the country” and rejected joining a free-trade agreement with the United States. The candidate made no effort to disguise his close relationship with Hugo Chávez and, along the lines of the Venezuelan president, announced intentions to call a constitutional assembly, as well as to “do away” with Congress, mistrusted by 95 of Ecuadoreans. Because of the uncertainty involved in the campaign, where the favored candidate, former vice president Leon Roldos, did not even make it to the

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fig. 6.5 Evolution of Ecuadorean country risk, 2006 election. Source: Global financial data.

second round, the financial markets’ reaction was not noticed until final results pointed to Correa as the new Ecuadorean president (figure 6.5). Investors’ response was significant, though, and peaked already during Correa’s term, reaching values twice the size of the previous year’s average (1,048 points in 2007, compared with 553 points in 2006). Even in the face of booming oil prices, the index has remained higher during Correa’s mandate than in previous years, reflecting investors’ lack of enthusiasm with his government’s agenda. Once he was elected, the president annulled the U.S. oil company Occidental’s operation in the country, which significantly increased the state’s participation in oil production. Correa also announced the revision of concessions in the mining and oil sectors, where the government initially proposed to raise the state’s share of oil windfalls to 99. Correa also successfully forced a favorable renewal of a telecommunications concession and passed a law that forbids outsourcing in the private sector, besides freezing prices of basic food items. He also showed no interest in signing a bilateral agreement with the United States, strongly demanded by local and international investors. Besides the behavior of the Ecuadorean country risk, investors’ response has been reflected in lower foreign direct investment in Ecuador and in more restricted foreign credit to local banks. Industrialists threatened to leave the country and move to neighboring countries like Peru, where the government is recognized as “investor friendly” and a free-trade agreement with the United States has already been signed. Conversely, 85 of Ecuadoreans approved of Correa at the end of his first year in office (compared with 26 for Gutiérrez). There is no way to understand the differences between Correa’s and Gutiérrez’s relations with investors without reference to the international economic

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scenario experienced by each president. The determinant of the scenario faced by Correa is the positive exogenous shock fostered by booming oil prices since 2004 and already consolidated when Correa was elected. That shock, in combination with the country’s reduced exposure to foreign debt prompted by lower international interest rates, left his government less subject to the pressures imposed by capital mobility. Strong exports currently more than compensate for the costs of more expensive credit and lower private investment, at least in the short term. In the face of these conditions, Correa affirmed in his inaugural address that “Ecuadoreans are leaving the night of neoliberalism behind” and called for twenty-first-century socialism. He also announced plans to tighten government control over the banking system and to expand the state’s role in the production and commercialization of Ecuador’s oil, as well as to cut ties to international lending institutions. Correa reaffirmed his intention not to discard a moratorium on debt payments, showing little worry about the possibility that Ecuador might have its access to new foreign credit cut as a consequence of this decision. Furthermore, the president explicitly affi rmed that he had no interest whatsoever in the evolution of the country’s risk measures. In his words: “If the country risk goes up because of speculators worrying over our ability to pay the debt, I don’t care. The country risk I care about is children suffering. If they’re ner vous, let them take a Valium. What more can I do?” (AFX-Asia, December 1, 2006). Although Correa’s effort to implement the redistributive agenda he promised during his campaign seems clear, the government’s strategy to implement state-led growth is highly dependent on the continuation of the oil boom—the dependence on which, according to analysts, is worrisome. The incapacity to create or little effort devoted to creating an attractive environment for private investment raises concerns that his government may become just one more populist experience in Latin America, redistributive in the short term but unequipped to build capacity designed to foster wealth that can be redistributed in the future.

Chávez: From Orthodoxy to “Twenty-First-Century Socialism” in Venezuela The goal of this section is to demonstrate how exogenous shocks affect investors’ capacity to influence governments’ choices, but this time I control for the “incumbency effect.” In order to do so, I analyze Chávez’s behavior vis-àvis investors in the nine years of his mandate in Venezuela and show that the same incumbent can behave in very different ways depending on the maneuvering room he has to implement his announced program.

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When Chávez was inaugurated in 1999, Venezuela had already experienced two decades of deterioration of economic conditions (López Maya 2005), characterized by a drastic reduction of growth rates (GDP per capita growth averaged 1 between 1990 and 1998), increased poverty (the percentage of the poor in the population doubled from 25 in 1981 to 49 in 1999), and a significant rise of income inequality (the Gini coefficient increased from 0.47 in 1990 to 0.50 in 1999). In parallel, and in part as a consequence of the economic crisis, Venezuelans also confronted political turmoil, a result of successive governments’ incapacity to deal with increased poverty and corruption. This process produced a detachment between the party bureaucracy and society that not only affected the image of specific leaders or governments but also extended popular disillusionment with the political system itself (Penfold-Becerra 2001; Levine 2001; Hellinger 2003; Buxton 2003; López Maya 2005). The two governments before Chávez’s term were characterized by an unequivocal break with campaign promises (Stokes 2001), first when Carlos Andrés Pérez unexpectedly switched to an orthodox program days after election (Hernández and Giusti 2006), and then when Rafael Caldera, who had made a commitment never to resort to the IMF, announced a standby agreement followed by a rise in oil prices, a sharp devaluation of the bolivar, increases in sales taxes, and the liberalization of exchange and interest rates, as well as the opening of the Venezuelan oil sector to foreign investment. This scenario explains the value attributed, especially but not only by the poorer strata of the population, to an outsider whose discourse centered on criticism of Venezuelan democratic institutions and social injustice (Lander 2007). In that sense, one cannot overlook the similarity of the processes occurring in the country to political developments in Bolivia, Peru, and Ecuador, among the most prominent cases. Chávez became notorious after leading a failed attempt to oust president Carlos Andrés Pérez and to seize the presidency by means of force in 1992. According to his biographers, in 1982 Chávez was already involved in conspiratorial movements whose aim was to establish a nationalist autocracy on the model of Velasco Alvarado’s in Peru. After being arrested for the coup attempt, Chávez took to himself all the responsibility for the initiative, a symbolic act in a country where politicians were regarded as not taking any responsibility whatsoever, and became popular among Venezuelans for that reason (López Maya 2003). When Chávez was running for president six years later, he had already been released from prison by former president Caldera, who, at the time of the coup, was the fi rst to recognize it as a consequence of Venezuelans’ dissatisfaction with politics and with economic conditions in the country. Chávez’s campaign was characterized by a radically redistributive discourse

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fig. 6.6 Evolution of Venezuelan country risk, 1998 election. Source: Global financial data.

in a period particularly severe since the Asian crisis of 1997. The markets’ response led to significant increases in capital outflows and country-risk indexes (figure 6.6). In a scenario even less favorable than the one faced by Gutiérrez in Ecuador, Chávez’s room to deviate from investors’ policy preferences was very narrow in the first years of his first term. The price of a barrel of Venezuelan oil in international markets was on average US$25 in 1999–2001, compared with US$62 in 2006. Chávez’s pragmatic behavior in this period fostered optimistic responses from fi nancial investors. The president retained Maritza Izaguirre, the finance minister from Caldera’s team, who was well regarded by the markets, and conducted orthodox macroeconomic management, keeping public expenditures significantly low. Chávez also refrained from displaying any intention to increase the share of the state in the Venezuelan economy in these years. With the approval of the 2000 constitution, however, the president used the powers delegated by the Congress to pass laws that raised the Venezuelan state’s share in the oil sector, and he initiated the expropriation of lands destined for agrarian reform. These measures marked the beginning of a period of rising confrontation between the government and the Venezuelan private sector that culminated in a frustrated coup attempt and a general strike joined even by the state oil company Petróleos de Venezuela (PDVSA) that severely damaged the country’s economy in 2002. In addition, the government’s timid economic results, after the high expectations raised by his campaign promises, hurt the president’s popularity. In 2002 Chávez reached the lowest rates of approval since his inauguration, when only 36 of Venezuelans approved of the government, compared with 67 a year before.

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80 70 60 Missions 50 40 30 20 10 1999-4 2001-1 2002-1 2002-4 2003-4 2005-2 2006-1 2006-4 Approval

Disapproval

fig. 6.7 Chávez’s popularity and the misiones. Source: Alfredo Keller y Asociados, “Las Perspectivas Politicas,” PowerPoint presentation, 2006.

After the events of 2002–3, the rupture between the Chávez government and the Venezuelan private sector became inevitable (López Maya 2005). The president recovered the government’s control over PDVSA, radicalized his already-polarizing discourse, and later established price controls on basic products. In parallel, and initially in order to prevent an already-significant capital flight from the Venezuelan economy, Chávez imposed an exchangerate control that progressively turned into an instrument of political control over the business sector. The behavior of oil prices cannot be downplayed in providing Chávez with the conditions to ignore the demands from the business community and advance his “Bolivarian revolution.” Despite significant drops in private investment, the oil sector has been able to boost the country’s rates of economic growth and thus Chávez’s popularity, especially in the poorest sectors of the population. It is no coincidence that after 2003 Chávez launched the misiones (missions), social initiatives that were based on the Cuban experience and were established outside the infrastructure of the Venezuelan state, answering directly to the presidency (Agullo 2006; Rodríguez 2006). Polls suggest that the initial impact of the missions was decisive in the recovery of Chávez’s popularity in 2004 from the crisis period faced in the first years of the government (figure 6.7). In 2004 his government was approved with 60 of the votes in a popular referendum. Higher social expenditures and the establishment of the missions were also fundamental in explaining Chávez’s reelection in 2006, interpreted by the president as a mandate to further his “twenty-first-century socialism.” This period marked a new phase of Chávez’s relations with investors. The

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president, strengthened by historically high oil prices and by the autonomy provided by control of the Congress, the central bank, and the PDVSA and helped by a favorable judiciary, revealed his intention to reassess the role of the state in the Venezuelan economy and to nationalize companies deemed strategic to the country’s development. The process was initiated in the oil sector, where concessions were replaced by societies in which PDVSA became the majority shareholder. Chávez also nationalized Compañía Anónima Nacional Teléfonos de Venezuela, the monopolistic fi rm operating in the telecommunications sector; the electricity of Caracas; and more recently Siderúgica del Orinoco, the country’s major steel company. These first nationalizations were coherent with Chávez’s announced intention to regain control of “strategic sectors” and to provide evidence of the government’s capacity, boosted by high oil prices and the concentration of political power, to confront investors. In the second wave of nationalizations that followed his reelection, this confrontation was further increased because Chávez nationalized businesses that had never before been classified as strategic, but that became key to guaranteeing the victory of the president’s allies in the regional elections of 2008. In order to boost the government’s capacity to build houses for the poor, the president announced the nationalization of cement companies. Aiming to combat food scarcity, Chávez nationalized Cealco, the country’s major food warehouse, as well as Lacteo Los Andes, producer of 30 of Venezuelan milk. Analysts concerned with the excessive power of chavismo in Venezuela argue that in the current scenario, only the decline or even the stabilization of oil prices could force the president to adopt a more conciliatory stand in the government’s relations with the Venezuelan private sector. In the hypothesis of a decline of oil prices, Chávez is expected to return to the same lowleverage position he was in during the first years of his mandate. Unlike that period, however, Chávez has now concentrated his political power to a point where his response to an eventual fall of oil revenues could result in an even more confrontational approach toward investors in an attempt to extend the state’s control over the Venezuelan economy further. The most recent nationalizations could be evidence of that trend. To return to the central theme of this chapter, the oil windfall allowed Chávez to promote economic growth through government expenditures and investments, even in the face of lower levels of private investment, while at the same time he redistributed income to the poorest Venezuelans (figure 6.8). The country’s growth rates averaged 30 in nominal terms, while the Gini coefficient dropped from 0.50 to 0.44 during Chávez’s presidency. It is important to note, however, that low levels of investment, allied to the boost in consumption, have contributed to the country’s dramatic reliance

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fig. 6.8 Foreign direct investment, oil prices, and growth under Chávez. Sources: Data supplied by the World Bank and the Federal Reserve Bank of St. Louis.

on imports and to rates of inflation among the highest in Latin America. All these factors suggest that Chávez’s lack of interest in strengthening the country’s private sector might make his strategy unsustainable in the longer term.

Conclusion: Capital Mobility, Exogenous Cycles, and “Room to Redistribute” Despite the fact that wealth has been concentrated in Latin America since the colonial period, positive democratic theories infer that more than two

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decades of democratic rule should have contributed to a reduction in the exceedingly high levels of income inequality observed in the region. Surprisingly, they have not done so, and one of the purposes of this book is to account for that puzzle. In this chapter, I have argued that the internationalization of financial markets, which occurred in parallel with redemocratization in the region, provided capital holders with increased capacity to “exit” (Hirschman 1978) Latin American economies, which then contributed to governments’ incapacity to redistribute income to the poor. Moreover, I have contended that, differently from what is assumed in Boix’s (2003) analysis, in a significant number of cases governments’ decisions to moderate taxation and redistribution cannot be claimed to reflect voters’ awareness and acceptance of the constraints imposed by capital flight. Conversely, I have shown that presidential candidates frequently run and are elected in Latin America with a discourse centered on social justice and greater state intervention aimed at providing social ser vices, fostering employment, and redistributing income to the poor. Next, I have provided evidence that elections of candidates who display a left-of-center discourse during campaigns are more likely to trigger capital outflows, which supports the claim that investors tend to leave economies where they anticipate prospects of higher redistribution. Under negative exogenous shocks, when capital fl ight frequently turns into currency crisis, left ist presidents from Latin America have repeatedly chosen to switch to conservative economic programs in order to reattract investors to the economy. In booming periods, on the contrary, when international markets of goods and/or capital are unexpectedly favorable, governments on the left are provided with more room to deviate from investors’ preferred policies and to implement their announced programs. Under these circumstances, policy switches are less likely to occur because redistributive programs have higher chances to be put in place. A major implication of this analysis is its indication that there is a higher level of confl ict and instability in democracies under high capital mobility than is accounted for in Boix’s (2003) framework. In addition to the theoretical claims summarized above, this chapter has included case studies of Brazil, Ecuador, and Venezuela that aimed to illustrate (1) the mechanisms that associate prospects of a left turn in government, currency crises, and policy switches and (2) how exogenous shocks affect leftist governments’ room to deviate from investors’ preferences. I started with the election of Lula da Silva in Brazil, where the 2002 presidential race took place in the aftermath of the Argentine default, in a period characterized by low liquidity in international financial markets. Despite

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claims that the Argentine crisis had no spillover effects in the region, investors proved particularly risk averse with respect to emerging economies, in general, by that time. Lula’s prospects of winning triggered unexpected panic in financial markets, reflected in substantial capital outflows from the Brazilian economy months before the election. As a result, once the president was inaugurated, he chose to switch to a conservative economic program, seeking to reattract investors to the economy. Gutiérrez experienced a negative international scenario similar to that of Lula in 2002. Historically low prices in oil-dependent Ecuador further increased his urge to reattract private capital after the speculative attack occurred during the presidential race. Like Lula, Gutiérrez also chose to abandon his campaign promises, committing himself to the orthodox agenda investors demanded very early in his mandate. Correa, the next president of Ecuador, elected with a leftist discourse and political support comparable to Gutiérrez’s, confronted a quite distinct scenario. Historically high oil prices, in conjunction with liquid international financial markets, enabled Correa to use windfall oil prices to promote state-led growth and to redistribute income while adopting a tough stance toward private investors. Although part of the difference between Gutiérrez’s and Correa’s behaviors might be attributable to their different personalities and backgrounds, Chávez’s case in Venezuela allows us to “control” for the incumbents’ identity by making it possible to observe the effect of changing exogenous conditions (once again oil prices) on investors’ capacity to influence policy choices. After portraying himself as a left-wing alternative in the 1998 presidential race, once he was inaugurated, Chávez adopted more moderate behavior toward private investors, as well as an orthodox macroeconomic program. After 2004, oil prices soared, providing the president with the capacity to promote economic growth regardless of private investment decisions. Since then, Chávez’s moderate stance has been progressively replaced by his so-called twenty-firstcentury Venezuelan socialism. All these cases illustrate the theoretical claims made in this chapter by revealing governments’ trade-offs between creating incentives to attract and keep private investment and risking the loss of voters’ support because of the impossibility of redistributing income or instead prioritizing income redistribution and consequently reducing incentives for private investment. In Latin America, it is debatable whether acute levels of income inequality might render this choice a zero-sum game between poor voters and capital holders, for which local societies have not yet found a solution.

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Note 1. Speculative attacks are calculated following Eichengreen et al. (1995).

References Agullo, Juan. 2006. “Venezuela en su contexto: Crisis social y cambio político.” In Balance y perspectivas de la política social en Venezuela, edited by Thais Maingón, 309–29. Caracas: Instituto Latinoamericano de Investigaciones Sociales. Alesina, Alberto, and Dani Rodrik. 1994. “Distributive Politics and Economic Growth.” Quarterly Journal of Economics 109 (2): 465–90. Austen-Smith, David. 2000. “Redistributing Income Under Proportional Representation.” Journal of Political Economy 108 (6): 1235–69. Bjorvatn, Kjetil, and Alexander W. Cappelen. 2004. “Globalisation, Inequality, and Redistribution.” Center for European Governance and Economic Development Research Discussion Paper 33, University of Göttingen, Germany. Boix, Carles. 2003. Democracy and Redistribution. Cambridge: Cambridge University Press. Bowles, Samuel. 2000. “Globalization and Redistribution: Feasible Egalitarianism in a Competitive World.” CSED Working Paper 15, Brookings Institution, Washington, D.C. http://www.brookings.edu/reports/2000/09development _ bowles.aspx . Buxton, Julia. 2003. “Economic Policy and the Rise of Hugo Chávez.” In Venezuelan Politics in the Chávez Era: Class, Polarization, and Conflict, edited by Steve Ellner and Daniel Hellinger, 113–30. Boulder, Colo.: Lynne Rienner. Eichengreen, Barry, Andrew K. Rose, Charles Wyplosz, Bernard Dumas, and Axel Weber. 1995. “Exchange Market Mayhem: The Antecedents and Aftermath of Speculative Attacks.” Economic Policy 10 (21): 249–312. Fiorina, Morris P. 1981. Retrospective Voting in American National Elections. New Haven: Yale University Press. Garrett, Geoff rey. 1998. “Global Markets and National Politics: Collision Course or Virtuous Circle?” International Organization 52 (4): 787–824. Haggard, Stephan, and Robert Kaufman. 1995. The Political Economy of Democratic Transitions. Princeton: Princeton University Press. Hellinger, Daniel. 2003. “Political Overview: The Breakdown of Puntofijismo and the Rise of Chavismo.” In Venezuelan Politics in the Chávez Era: Class, Polarization, and Conflict, edited by Steve Ellner and Daniel Hellinger, 27–54. Boulder, Colo.: Lynne Rienner. Hernández, Ramón, and Roberto Giusti. 2006. Carlos Andrés Pérez: Memorias proscritas. Caracas: Los Libros de El Nacional. Hirschman, Albert O. 1978. “Exit, Voice, and the State.” World Politics 31 (1): 90–107. Hurtado, Osvaldo. 2006. Los costos del populismo. Quito: CORDES. Keohane, Robert O., and Helen V. Milner. 1996. “Internationalization and Domestic Politics: An Introduction.” In Internationalization and Domestic Politics, edited by Robert O. Keohane and Helen V. Milner, 3–25. Cambridge: Cambridge University Press.

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Lander, Edgardo. 2007. “Venezuelan Social Conflict in a Global Context.” In Venezuela: Hugo Chávez and the Decline of an “Exceptional Democracy,” edited by Steve Ellner and Miguel Tinker Salas, 16–31. Lanham, Md.: Rowman and Littlefield. Leblang, David A. 2002. “The Political Economy of Speculative Attacks in the Developing World.” International Studies Quarterly 46 (1): 69–91. Levine, Daniel H. 2001. “Diez tesis sobre la decadencia y crisis de la democracia en Venezuela.” In Venezuela en transición: Elecciones y democracia, 1998–2000, edited by José Vicente Carrasquero, Thais Maingón, and Friedrich Welsch, 10–35. Caracas: CDB Publicaciones–RedPol. Lewis-Beck, Michael. 1988. Economics and Elections: The Major Western Democracies. Ann Arbor: University of Michigan Press. Lewis-Beck, Michael, and Mary Stegmeier. 2000. “Economic Determinants of Electoral Outcomes.” Annual Review of Political Science 3 (2): 183–219. Lindblom, Charles. 1977. Politics and Markets: The World’s Political Economic Systems. New York: Basic Books. ———. 1982. “The Market as Prison.” Journal of Politics 44 (2): 324–36. López Maya, Margarita. 2003. “Hugo Chávez Frías: His Movement and His Presidency.” In Venezuelan Politics in the Chávez Era: Class, Polarization, and Conflict, edited by Steve Ellner and Daniel Hellinger, 73–92. Boulder, Colo.: Lynne Rienner. ———. 2005. Del viernes negro al referendo revocatorio. Caracas: Alfadil Ediciones. Meltzer, Allan H., and Scott F. Richard. 1981. “A Rational Theory of the Size of Government.” Journal of Political Economy 89 (5): 914–27. Mitchell, Neil J. 1997. The Conspicuous Corporation: Business, Public Policy, and Representative Democracy. Ann Arbor: University of Michigan Press. O’Donnell, Guillermo. 1998. “Poverty and Inequal ity in Latin America: Some Reflections.” In Poverty and Inequality in Latin America: Issues and New Challenges, edited by Victor E. Tokman and Guillermo O’Donnell, 49–71. Notre Dame: University of Notre Dame Press. Pachano, Simón. 2005. “Ecuador: Cuando la inestabilidad se vuelve estable.” Iconos: Revista de Ciencias Sociales 23:37–44. Penfold-Becerra, Michael. 2001. “El colapso del sistema de partidos en Venezuela: Explicación de una muerte anunciada.” In Venezuela en transición: Elecciones y democracia, 1998–2000, edited by José Vicente Carrasquero, Thais Maingón, and Friedrich Welsch, 36–51. Caracas: CDB Publicaciones–RedPol. Przeworski, Adam. 1985. Capitalism and Social Democracy. Cambridge: Cambridge University Press. Przeworski, Adam, and Michael Wallerstein. 1982. “The Structure of Class Conflict in Democratic Capitalist Societies.” American Political Science Review 76 (2): 215–38. ———. 1988. “Structural Dependence of the State on Capital.” American Political Science Review 82 (1): 11–29. Remmer, Karen. 1993. “The Political Economy of Elections in Latin America, 1980– 1991.” American Political Science Review 87 (2): 393–407. Rodríguez, Enrique. 2006. “Política social actual: Una visión desde el gobierno.” In Balance y perspectivas de la política social en Venezuela, edited by Thais Maingón, 309–29. Caracas: Instituto Latinoamericano de Investigaciones Sociales. Rodrik, Dani. 2000. “How Far Will International Economic Integration Go?” Journal of Economic Perspectives 14 (1): 177–86. Samuels, David. 2004. “Presidentialism and Accountability for the Economy in Comparative Perspective.” American Political Science Review 98 (3): 425–36.

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Santiso, Javier. 2006. Presentation at Casa de América, Madrid, June 8–9. Santiso, Javier, and Juan Martínez. 2003. “Financial Markets and Politics: The Confidence Game in Latin American Emerging Markets.” International Political Science Review 24 (3): 363–95. Stokes, Susan C. 2001. Mandates and Democracy: Neoliberalism by Surprise in Latin America. Cambridge: Cambridge University Press. Swank, Duane. 1992. “Politics and the Structural Dependence of the State in Democratic Capitalist Nations.” American Political Science Review 86 (1): 38–54. Weyland, Kurt. 2004. “Neoliberalism and Democracy in Latin America: A Mixed Record.” Latin American Politics and Society 46 (1): 135–57.

7

Inequality and the Cost of Electoral Campaigns Maurício Bugarin, Adriana Cuoco Portugal, and Sergio Naruhiko Sakurai

Introduction A fundamental characteristic of Latin America is the region’s high level of inequality. As described in the introduction of this volume, Latin America has the highest average regional Gini coefficient in the world. Filgueira’s quantitative analysis in chapter 1 of this book confirms that inequality is indeed a main trait that clusters Latin American countries separately from the rest of the world. It is also a region that has shown impressive developments in democracy during the past decades. Indeed, according to the United Nations Development Programme (UNDP 2004), the Index of Electoral Democracy rose from below 0.3 in 1977 to above 0.9 in 2002. In particular, electoral institutions are consolidating in most countries, and regular elections have become the rule. An important question that arises in this context of consolidating democracy in Latin America is the effect of income inequality on the electoral process. Because campaign financing, be it public or private, is essential for the workings of the electoral process, one would like to understand how income inequality affects the cost of electoral campaigns. One natural hypothesis is that high-income countries should have relatively more expensive electoral campaigns and, therefore, be more exposed to the influence of money on the electoral process. Moreover, there is evidence The authors are extremely grateful for the very deep insights and suggestions from the participants of the First and Second Ford Observatory Workshops on Inequality in Latin America, University of Miami, November 2007 and May 2008. The views expressed here are those of the authors and not necessarily those of the Tribunal de Contas do Distrito Federal. Maurício Bugarin acknowledges a CNPq research grant.

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of high correlation between a country’s GDP and its income inequality level. Indeed, in a World Bank 2009 database consisting of 140 countries for which there are data on GDP and on the Gini coefficient, this chapter’s authors found a correlation above 40. If we exclude from that database the 60 countries with middle GDP, this correlation jumps to more than 50. Therefore, one would expect that high-inequality countries would be more immune to expensive electoral campaigns. Unfortunately, there seems to be no clear empirical evidence supporting that hypothesis. In fact, Samuels (2001a) argues that Brazilian elections are relatively more expensive than their U.S. counterparts. The September 25, 2008, edition of the Economist also suggests that elections are very expensive in Brazil, even for the lowly office of city representatives (vereadores) (Economist 2008). Th is chapter develops a careful analysis of the relationship between inequality and the cost of electoral campaigns at both theoretic and empirical levels. It is divided into three sections and one appendix in addition to this introduction. The first main section describes the basic model of electoral competition in the presence of public and private financing and discusses its solutions, as well as its testable implications. The main theoretical finding is that, contrary to the previously described hypothesis, more unequal societies tend to yield relatively more expensive electoral campaigns. The second main section performs empirical tests of that hypothesis and finds supporting evidence that in Brazil, higher inequality tends to be associated with higher costs of electoral campaigns. Moreover, the econometric tests suggest that higher age dispersion and higher educational dispersion of the population also increase the costs of electoral campaigns. Therefore, increasing the educational attainment in a society tends to reduce the cost of electoral campaigns. The conclusion reviews the main findings of the present research and discusses its possible extensions. Finally, the appendix presents the mathematical development of the model.

A Model of Electoral Competition with Public and Private Electoral Financing and Office- and Policy-Motivated Parties Main Elements of the Model

The electoral-competition model is strongly founded on Portugal and Bugarin (2007), which presents an extension of a model in Persson and Tabellini (2000, chapter 3). Figure 7.1 presents the electoral-competition game among parties, lobbyists, and voters, whose main elements are discussed here.

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Parties simultaneously announce their political platforms.

Lobbyists simultaneously choose their campaign contributions.

Parties use contributions to influence voters during the electoral campaign.

Stochastic factors that affect voters’ preferences for parties are realized.

Citizens vote.

The party with a majority of votes implements its announced policy. fig. 7.1 The electoral-competition game.

Society is divided into two classes, the “rich” and the “poor.” The rich have high income, whereas the poor have low income. There are two parties, the “left” party and the “right” party. The electoral campaign begins when each party announces its political platform, which corresponds to a certain amount of per capita public goods to be provided if elected. All citizens pay taxes on their incomes to finance the provision of public goods. According to Mahon’s analysis in chapter 10 of this book, the tax system in Latin America relies less on progressive income or wealth taxes and more on indirect taxes. In order to approach that reality, the present model assumes that the tax rate is the same for everyone, so that although a rich citizen pays a higher total amount of taxes than a poor one, all citizens expend the same proportion of their income on taxes; that is, the tax system is not progressive. Each party has a preferred level of public goods provision; the left party prefers high public goods provision with high associated taxes, whereas the

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right party prefers low public goods provision with low associated taxes. The difference in parties’ preferences on income distribution through public goods provision reflects the increased polarization in attitudes toward inequality in Latin America shown in Blofield and Luna’s analysis in chapter 5 of this book. It also reflects different attitudes of the elites toward redistributions discussed in Reis’s analysis in chapter 3. Moreover, parties value officeholding; that is, they also want to win the electoral-competition game. Each income class is organized as a lobby interest group that can provide private financing for the electoral campaign. Once a lobby group is informed of each party’s political platform, it decides how much financing to contribute to each of the parties. Each party uses the resources obtained from lobby groups to influence voters’ electoral preferences. Each citizen, rich or poor, votes in a one-district national election for one of the two parties, according to his or her preferences. Voters’ preferences are affected by several factors. First, they are affected by the policy announcement of the parties. Because the rich pay relatively more for public goods provision, they prefer lower public output than the poor. Therefore, they tend to prefer a party whose platform requires lower public goods provision. Conversely, the poor tend to favor a party whose announced platform requires higher public goods provision. Second, voters’ preferences are affected by the electoral campaign in such a way that they tend to prefer a party that spends more money during the campaign to a party that spends less money. That is the influence effect of money spent on the electoral campaign. Finally, stochastic variables that are realized just before voters cast their ballots also affect voters’ preferences. These variables capture the other factors not related to the parties’ electoral platform or campaign expenditures that may affect voters’ preferences. Natural disasters, terrorist attacks, sudden news about politicians’ private lives, and corruption scandals are all examples of uncontrollable factors that may affect voters’ preferences in favor of one party or the other. These variables introduce a probabilistic voting approach into the model. Citizens vote sincerely, taking into consideration all deterministic and stochastic factors that affect their preferences. Then the party that obtains a majority of votes implements its announced platform. The Solution Strategy

We solve the model by backward induction in a multistage finite game. First, we determine what voters’ electoral decisions will be, given all deterministic and stochastic variables that affect their preferences in the last (third) stage of the game. Then we determine how much each lobby group will contribute to

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each of the parties in the second stage of the game, given the parties’ announced platforms and the lobbyists’ understanding about the effect of the electoral campaign on voters’ preferences. This is a one-stage simultaneous game between the two lobby groups, where the lobbyists consider their expected utilities, given that they do not observe the realization of the stochastic variables at the moment they choose their campaign contribution levels. Finally, we determine each party’s announced platform in the first stage of the game, given parties’ understanding of what the corresponding choice of lobbyists’ campaign contributions and voters’ electoral decisions will be. Here again the parties play a one-stage simultaneous game where they take into consideration expected utilities because, again, the stochastic variables are not yet realized at the beginning of the electoral campaign. The Equilibrium Platform

The fundamental result concerning the theoretical solution is that parties’ announced platforms are distinct in that in equilibrium the left party proposes a higher provision of public goods than the right party. This nonconvergence result is a consequence of the fact that each party has its preferred policy, and moving away from that policy reduces its utility. The main tradeoff a party faces is how much it is willing to deviate from its preferred policy in order to increase its probability of winning the election. The amount of policy divergence in equilibrium depends on that trade-off. If parties care much more about winning the election than about their preferred policies, then the announced policies will be very close to each other, and there will be little platform divergence. On the other hand, if parties attach more importance to defending their traditional positions, then the announced policies will be very different from each other, and there will be high platform divergence. Moreover, the model shows that the higher the inequality in society, the higher the divergence will be. Blofield and Luna find in chapter 5 that attitudes toward inequality and redistribution in Latin America are more polarized than in advanced democracies and that they are strongly correlated with an individual’s class position. The divergence result we find is clearly consistent with their findings. A second result relates the probability of victory of a party to its ideological rigidity, that is, the importance it attaches to defending its traditional positions. Indeed, the more ideologically rigid a party is, the lower is its probability of victory. Conversely, the more ideologically flexible a party is, the higher is its probability of victory. A third result concerns lobbyist contributions. Because there is platform divergence, there will also be positive and divergent campaign contributions in the sense that the rich will contribute to the right party, whereas the poor

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will contribute to the left party. In particular, parties are trading off “direct votes” by choosing a policy proposal that is further away from their constituents’ preferred ones for “indirect votes” that can be obtained by means of influencing votes during the electoral campaigns with the contributions they obtain from the lobby groups. Note that the probabilistic model does not reveal which party will win the electoral race. However, it does show that depending on which party wins, very different policies will be implemented. This result may help explain the “shift to the left” that has occurred in some Latin American countries, as fully discussed by Filgueira and colleagues in chapter 8. The Main Results of the Model

A careful analysis of the solutions to the model allows us to determine how the total amount contributed by the lobbyists to the electoral campaign is affected by a measure of income inequality. The main result is that under simple regularity assumptions, we can prove a positive relationship between these two variables; that is, the more unequal a society is, the more contributions the interest groups will be willing to make to the electoral campaign. The intuition behind this result is rather simple. In more equal societies, there is little difference between the two classes’ preferred levels of provision of public goods. This commonality of interest, in turn, makes it more costly in terms of votes for a party to announce a policy that differs from the one preferred by the average voter. Therefore, parties announce platforms closer to each other. But then, interest groups see little gain in spending money in the electoral campaign because the differences in public goods provision, depending on which party wins the elections, are small. Hence the interest groups are less inclined to contribute to the electoral campaigns, and, therefore, campaigns are cheaper. The argument goes symmetrically as a society becomes more unequal. Higher inequality means a more polarized society that, in turn, allows for more divergent policy announcements by parties; but then, interest groups understand that there is much at stake in the election because a policy very different from their preferred policy may be implemented if the party further away from them wins the election. Therefore, interest groups become more willing to contribute to their preferred parties and thus generate more expensive electoral campaigns. In summary, more unequal societies are expected to have more costly political campaigns per capita. That result is in line with Samuels’s (2001a) assertion that Brazilian elections are relatively more expensive than U.S. ones. Moreover, this result is of very special concern for Latin American countries

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because of their particularly high levels of inequality. Therefore, the model results highlight the importance of well regulating electoral campaigns in Latin America. In order to assess the relevance of our theoretical model’s conclusions, we need to analyze the empirical evidence of its main testable implication, namely, that elections are more costly in more unequal societies. The next part of this research aims at developing an empirical methodology to test this result. The next section presents the main econometric results for Brazil.

The Cost of Electoral Campaigns in Brazil “In 1993, for the 1994 elections on, Brazil’s congress passed a law requiring all candidates to submit a prestação de contas, or a registry of campaign contributions, to the national electoral court, the Tribunal Superior Eleitoral (TSE) in Brasília. Violations of the law could result in fines, revocation of a candidacy, or even loss of one’s seat after the election” (Samuels 2001a, 581). This law resulted in a rich database on financing of electoral campaigns. Our first step in this research will be to explore that database. There are elections every two years in Brazil. In 2006 there were elections for president, federal senators, representatives in the federal Chamber of Deputies, state governors, and state assembly representatives. Two years earlier, in 2004, there were elections for mayors and municipal assembly representatives. Two years before that, in 2002, elections were held for the same positions as in 2006; in 2000, for mayors and municipal assembly representatives, as in 2004; and so on. For this analysis we initially performed an econometric investigation using the 2002 electoral data for the federal Senate, the federal Chamber of Deputies, state governors, and state chambers of deputies’ representatives. Second, we performed a more careful analysis that used the 2004 electoral data for municipality mayors and the municipal chambers of representatives. Initial Exploration: The 2002 Elections at the State Level

We ran four ordinary least squares (OLS) regressions, one for each election held in 2002. Regression 1 refers to the campaign for the federal Senate, regression 2 refers to the election for the federal Chamber of Deputies, regression 3 refers to the races for state governor, and regression 4 refers to the election for the states’ chambers of deputies. The dependent variable is the total campaign resources received by all candidates in reals, the Brazilian currency denomination, as declared to the TSE, divided by the number of candidates and

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by the total number of voters (in thousands of voters). We used the following explanatory variables: the states’ Gini indexes as proxies for inequality; the states’ Gini indexes multiplied by the states’ respective average incomes to test whether the effects of inequality on electoral campaign costs are more important in richer states; and an index of age fragmentation of the population as a proxy for how heterogeneous the electorate is in age span. 10

The index of age fragmentation is calculated as 1 − / v 2j , where vj is the j=1

percentage of voters in age class j, one of the ten age classes. The less fragmented voters’ age classes are, that is, the more concentrated the population is in a few age classes, the lower the index. On the other hand, the more fragmented voters’ age classes are, the higher the index of age fragmentation is. Recall that the classic regression model is based on the assumption that the residual of an estimation, conditional on the explanatory variables, has constant variance (in other words, it is homoscedastic) and no correlation across observations. If these assumptions are violated, the OLS estimator is still unbiased, but it will be inefficient, and the standard errors cannot be trusted anymore. In order to control for possible heteroscedasticity, we use robust estimations in the present analysis. Specifically in this case, we employed the White estimator of variance to obtain the corrected standard errors in each regression, so as to assure that the estimations have minimum variance.

Table 7.1 2002 elections for the Brazilian Senate, Brazilian Chamber of Deputies, governors, and state chambers of deputies 







Regression

Federal Senate

Federal Chamber of Deputies

State governors

State chambers of deputies

Gini index

,.*** (.) −.*** (−.) −.*** (−.) ,.*** (.)

.*** (.) −.** (−.) −.*** (−.) ,.** (.)

,.* (.) −.*** (−.) −,.*** (−.) ,.*** (.)

.*** (.) −.*** (−.) −.*** (−.) ,.*** (.)

Gini index × per capita income Age fragmentation Constant R Observations

. 

* Statistically significant estimates at 10. ** Statistically significant estimates at 5. *** Statistically significant estimates at 1.

. 

. 

. 

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Table 7.1 reports the results of this initial study. The estimated coefficients appear in the first line of each cell, and the corresponding robust t-statistics appear in the second line, in parentheses. Note first that all regressions present the expected positive sign for the Gini coefficient. That is, the higher the Gini coefficient (which corresponds to higher levels of inequality), the higher the campaign costs. Moreover, the Gini coefficient was significant at a 1 significance level in all but regression 3, the state governors’ races, in which it was significant at 10. Therefore, according to these estimations, an increase of 1 percentage point in the Gini coefficient yields an increase of about 40 reals per voter per candidate in the Senate race, whereas the same increase in inequality yields an increase of about 90 reals per voter per candidate in the governors’ races. Second, the negative sign of the Gini coefficient times per capita income suggests that the effect of inequality on the cost of electoral campaigns decreases as average income increases, with a 1 significance level in all but regression 2, the federal Chamber of Deputies’ election, in which case it is significant at 5. This suggests that the pervasive effect of inequality on the cost of electoral campaigns is reduced as the region becomes richer. Third, the estimated coefficient of the index of age fragmentation was negative and significant at the 1 level in all regressions. This suggests that the more age heterogeneous a society is, the cheaper the elections are. One possible explanation of this result is that in more age-diverse societies, different candidates specialize in electorates of different ages. This reduces electoral competition and, therefore, the cost of the electoral campaign. On the other hand, when the population age is concentrated in a few age classes, all candidates compete for the same voters, which increases the cost of elections. The 2004 Elections at the Municipal Level

Campaign resources used at the municipal level are classified into three categories. The first category is the candidate’s party transfers from national- and state-level boards. The second is the candidate’s party transfers from local units (local political committees). Finally, the third is private donations, including private resources used in the campaign that belonged to the candidates themselves. Because party funds are partially supplied by public contributions and we are more directly concerned with private contributions, our dependent variable will be total campaign resources received by all candidates exclusively from private donations (the third category) in each Brazilian municipality, as declared to the TSE, in thousands of reals. It is noteworthy that according to our database, the total amount of revenue and the total amount of campaign

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expenditures are equal, meaning that in practice, all the resources are effectively spent by the candidates. Because we are using a cross section of Brazilian municipalities, one expects heteroscedastic residuals. Therefore, as in the previous study, we employed the White estimator of variance to obtain the corrected standard errors in each regression, so as to assure that the estimations have minimum variance. We ran three OLS regressions for the mayors’ polls and three OLS regressions for the municipal assembly polls. Each successive regression included the previous regression variables as well as additional variables, as described in the following list. Regression 1: Basic Inequality Variables i. The municipal Gini index and the municipal Gini multiplied by per capita municipal income as proxies for inequality. The use of the latter variable aims at investigating whether the effect of inequality on the cost of electoral campaigns is more important or less important in richer municipalities. Regression 2: Sociodemographic Variables ii. The amount of party transfers from national- and state-level boards (the first category of campaign revenue) in thousands of reals, in order to test whether there is a correlation between public and private campaign financing. iii. The number of candidates, the square of the number of candidates, the number of voters, and the square of the number of voters. These four variables were included in order to control for size effects both of the electorate and of the candidates. iv. An index of age fragmentation of the population as a proxy for how heterogeneous the electorate is in age span. As in the section on state-level 10

elections, the index of age fragmentation is calculated as 1 − / v 2j , where j=1

vj is the proportion of voters in age class j, one of the ten age classes. As in the previous study, the higher the index, the more fragmented the population in different age groups. v. An index of educational fragmentation as a measure of how the municipal population is composed with regard to levels of education. The index of educational fragmentation is calculated similarly to the index of age fragmentation, except that we have nine instruction levels. Therefore, the more homogeneous the educational level of society, the lower the index of educational fragmentation.

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Regression 3: Political Variables vi. The effective number of candidates running for mayor and for the municipal assembly as proxies for electoral competition, which excludes unexpressive candidates who received insignificant quantities of votes. More specifically, we considered the effective number of candidates in the election under consideration and also in the previous election. The former can be seen as an expectation of how competitive the coming race will be (which could possibly influence the amount of resources to be used during the electoral campaign), and the latter can be viewed as a measure of the competitiveness of the previous election and its influence in the coming one. vii. A dummy variable that takes the value 1 when a second round is to be held in the municipality (cities whose population is more than 200,000 people). Note that a second round applies only to the elections of mayors. Therefore, one would expect that variable to have no effect on the municipal assembly regression, but a positive effect in the mayoral elections, making the campaign more costly. viii. Only in the regressions using the mayoral election data, we included four dummy variables of political alignment with higher levels of government in order to evaluate whether an alliance with elected politicians at higher levels of government can increase the level of private donations to the local race. These dummies take value 1 if viii.i. the incumbent mayor belongs to the same political party as the president; viii.ii. the incumbent mayor belongs to the same political party as the state governor; viii.iii. the winner (a challenger of the incumbent or the incumbent himself or herself, in case he or she is reelected) belongs to the same political party as the president; or viii.iv. the winner belongs to the same political party as the state governor. Table 7.2 reports the results for the local mayoral elections. The estimated coefficients appear in the first line of each cell, and the corresponding robust t-statistics appear in the second line, in parentheses. Note that regression 1 has only two explanatory variables in addition to the constant. Therefore, it has a very low explanatory power (R  = 0.1259). Regressions 2 and 3, on the other hand, explain more than 70 of the variation in the cost of electoral campaigns.

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Table 7.2 OLS regressions for mayoral elections in Brazil, 2004 Regression specifications Gini index Gini index × per capita income Party donations

 .*** (.) .*** (.)

Number of candidates Number of candidates squared Number of voters Number of voters squared Educational fragmentation Age fragmentation





.*** (.) . (.) . (.) . (.) . (.) .*** (.) −.*** (−.) .*** (.) −.** (−.)

.*** (.) . (.) . (.) . (.) . (.) .*** (.) −.*** (−.) .*** (.) −.*** (−.) −.*** (−.)

Effective number of candidates in the current election Effective number of candidates in the previous election Second round Political alignment of governor and incumbent mayor Political alignment of president and incumbent mayor Political alignment of governor and winner Political alignment of president and winner Constant Observations R

−. (−.) .** (.) −. (−.) . (.)

−.*** (−.)

.* (.)

, .

* Statistically significant estimates at the 10 level. ** Statistically significant estimates at the 5 level. *** Statistically significant estimates at the 1 level.

, .

−. (−.) . (.) .** (.) , .

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229

All regressions confirm, at a 1 significance level, that there is a positive correlation between the Gini coefficient and the cost of political campaigns; that is, the more unequal a municipality is, the more costly mayors’ electoral campaigns are. In the third, more complete regression, an increase of 1 percentage point in the Gini coefficient yields an increase of more than 3,000 reals in private contributions to the electoral campaign. However, although the Gini coefficient times per capita income has the same negative sign as in the previous study, it is significant only in the initial regression 1, which has a reduced overall explanatory power. Neither party donations nor the number of candidates nor its square had any significance in any of the regressions. However, the number of voters affects the costs of electoral campaigns in an increasing, concave way, at a 1 significance level, in all corresponding regressions. The index of age fragmentation negatively affected the independent variable at a 5 significance level for regression 2 and at a 1 significance level for regression 3, which suggests that elections tend to be cheaper in more ageheterogeneous societies, a result that was also found in the simple state-level elections. In addition, the index of educational fragmentation is positive and significant at a 1 significance level for both regressions 2 and 3. This suggests that the more uniformly education is distributed in society, the cheaper the electoral campaigns are. This highlights one additional benefit of having a better-educated population. The effective number of candidates appears to be negatively correlated with the independent variable, a result that is also significant at the 1 level. This suggests that more competitive elections tend to receive lower amounts of private contributions than less competitive ones. That result deserves further exploration; however, one possible explanation is that the more competitive an election is, the less clear its results are, and, therefore, the riskier contributions are, viewed as a private agent’s investment. Therefore, the private sector will be less willing to contribute. Finally, there is a clear increase in the cost of elections when there are two electoral rounds, a natural result. Moreover, the political alignment variables do not appear to be significant. We obtain comparable results for the elections of the local (municipal) assembly representatives, which are reported in table 7.3. In particular, the positive effect of inequality on the cost of electoral campaigns (the coefficient of the Gini variable) is confirmed in all regressions at a 1 significance level. However, its magnitude is about half the one suggested in the mayoral election. Note, again, that the reduced significance of regression specification 1 reflects the fact that it uses only two explanatory variables in addition to the constant. Regressions 2 and 3 display a much better overall fit and are able to explain more than 95 of the variation of the cost of electoral campaigns.

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Table 7.3 2004

OLS regressions for municipal assembly representatives’ elections in Brazil,

Regression specifications Gini index Gini index × per capita income Party donations





.*** (.) .*** (.)

.*** (.) .*** (.) .*** (.) −. (−.) .** (.) .*** (.) . (−.) . (.) . (.)

Number of candidates Number of candidates squared Number of voters Number of voters squared Educational fragmentation Age fragmentation Effective number of candidates in the current election Effective number of candidates in the previous election

Observations R

.*** (.) . (.) .*** (.) . (.) .* (.) .*** (.) . (−.) .*** (.) −. (−.) −.*** (−.) −. (−.)

Second round Constant



−.*** (−.) ,

−. (−.) ,

.

.

. (.) . (.) , .

* Statistically significant estimates at the 10 level. ** Statistically significant estimates at the 5 level. *** Statistically significant estimates at the 1 level.

We next highlight the new results. The main novelty here is the highly significant (1) effect of party donations on the cost of electoral campaigns. This result suggests that despite the fact that Brazilian electoral rules indicate a high degree of decentralization in the sense that each candidate is responsible for his or her campaign funding, party funds still play a very important role in the financing of municipal electoral campaigns. Therefore, party donations appear to work as a signal to the private sector about who should be financed. That result, in turn, suggests that parties play an important role in

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the municipal assemblies’ electoral process. This differs from Samuels’s view that “Brazil’s campaign finance laws tend to exacerbate the weakness of its parties and the incentives of its electoral system” (2001b, 4). Note additionally that Gini coefficient times average income is significant at 1 in regressions 1 and 2 as well, but is not significant in regression 3. The positive coefficient of number of candidates squared becomes significant at 5 in regression 2 and at 10 in regression 3. Educational fragmentation loses its significance in regression 2, and age fragmentation becomes insignificant in both regressions 2 and 3. Moreover, the existence of a second round for the mayors’ elections does not affect the cost of the campaigns for the municipal assemblies, as expected.

Conclusion: Beyond the Brazilian Case The present study aims at better understanding the relationship between inequality and the cost of electoral campaigns, with a clear focus on one highly unequal country, Brazil. It is composed of two parts, a theoretical model and an empirical investigation. The theoretical analysis is based on a model of electoral competition with interest groups. The initial conclusion of that analysis suggests that elections tend to be more expensive in societies with higher levels of inequality. That suggestion was put to the test in the empirical part of this chapter. The preliminary empirical results, based on the Brazilian 2002 state elections, supported these findings. In addition, they hint that the more diverse a society is in the age distribution of its citizens, the less expensive the electoral campaign. A more careful empirical study was then conducted using the electoral data for the 2004 municipal elections in Brazil, both for mayors and for municipal assembly representatives. This much larger database included more than five thousand observations and confirmed this positive relation between inequality and the cost of electoral campaigns for the entire country. Moreover, the municipal data confirm that electoral campaign costs are negatively correlated with the index of age fragmentation. Furthermore, they are positively related to the index of educational fragmentation. Therefore, the more heterogeneous the educational distribution in a society is, the more expensive electoral campaigns are. This result suggests that educational inequality may play a role similar to income inequality in campaign costs, which is an additional argument in favor of a more equally educated society. However, these empirical results are restricted to the Brazilian case. Data on other developing countries and on advanced economies may shed some light to this chapter’s discussion. Furthermore, from a theoretical point of view,

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one would like to be able to introduce the new significant variables that have been highlighted in the empirical study in order to obtain a better understanding of the channels by which they affect electoral costs. The extensions of the empirical study to other countries and the enrichment of the theoretic model to include additional explanatory variables are left here as suggestions for future research.

Appendix: The Mathematical Model Voters’ Electoral Decisions There is a continuum of unit mass of voters, Ω = [, ]. Each voter belongs to one of two social classes according to his or her income. The upper class R (“rich”) is composed of voters with high income y R, whereas the lower class P (“poor”) includes voters with low income y P. Thus y R > y P. A social class J, where J = R or P, has mass α J, so that

/ a J = a P + a R = 1. Moreover, we J

naturally assume that there are more poor citizens than rich ones, that is, a P > 1 > a R. 2 There are two parties (P), A and B, which compete by announcing the level of production of a per capita public good g that will be provided if the party obtains the majority of seats in the legislature. Public goods provision is financed by an income tax given by the rate τ, which is the same for all voters. All tax-collected resources are converted into public goods and public funding for parties’ campaigns. Let c be the government’s per capita cost of public funding of electoral campaigns. Then the government budget constraint is a P t y P + a R t y R = t y = g + c , where y = a P y P + a R y R represents the average income of voters. A voter’s utility has two components: a pragmatic (or sociotropic) one and an ideological (or idiosyncratic) one. The pragmatic part of the utility represents the voter’s decisions as an economic agent and depends on the consumption of a private good, as well as the consumption of the public goods provided by the government. Suppose that platform g wins the election. Then yJ an agent of class J’s income, net of taxes, is c J = (1 − t) y J = ( y − g − c) , y which is normalized to be the agent’s private consumption utility. Moreover, the agent’s utility for public goods consumption is H(g), where H is a strictly −1 −1 increasing and strictly concave function such that ^H lh and H % ^H lh are strictly convex functions. Expression (1) shows the pragmatic part of the utility of a voter of class J:

In e qual ity and the Cost of Electoral Campaigns

W J ( g) = (y − g − c)

yJ + H ( g) y

233

(1)

Thus each class has its own optimal policy for public goods provision. These optimal policies are obtained by maximizing each class’s utility function and are given by g ∗R = ^H lh e −1

yR yP o, g ∗P = ^H lh−1 e o . y y

Note that the poor class’s preferred production of public good g ∗P is higher than the rich class’s one, g ∗R : g P∗ > g ∗R . This is a consequence of the fact that the rich contribute more money for the provision of the public good than the poor. The ideological component of a voter’s utility function is represented by two random variables corresponding to the voter’s bias toward party B or, equivalently, party B’s popularity at the time elections are held. The first random variable is common to all voters and is associated with the realization of a state of nature that affects the entire population. A war, an abrupt change in international prices of a commodity that is important to the country, and a countrywide energy crisis are examples of such phenomena. That process is described by a random variable δ that the model assumes is uniformly distributed on ;− 1 , 1 E . The parameter ψ >  measures the level of sensibil2y 2y ity of society to aggregate shocks: the lower the value of ψ, the more those shocks may affect society. The second random variable is particular to each voter i in group J and reflects his or her personal bias toward party B. This bias is modeled as a random variable σ iJ that is uniformly distributed on ;− 1 J , 2 J E . Hence the 2f 2f greater the parameter φ J, the more homogeneous class J is. For simplicity, and in order to avoid electoral effects of class heterogeneity, we normalize all the classes’ random variable parameters to φ = φ J, where J = P or R. Therefore, if party B wins a majority of seats in the legislature with the announced platform gB, a voter i in social class J derives utility WJ (gB) + σ iJ + δ. Note that positive values of σ iJ and δ indicate a favorable bias toward party B, whereas negative values indicate a favorable bias toward party A. Also note that the realization of the global random variable can be favorable to party B  and, at the same time, the realization of the individual-specific random variable can favor party A, and vice versa. Consider now the role of campaign contributions in the model. For simplicity, we assume that overall campaign spending will affect the ideological component of a voter’s utility function in a way that is linear to the difference

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between the total parties’ expenditure. Then the utility of a voter i of class J when party B’s (respectively, party A’s) campaign spending is CB (respectively, CA) and party B wins the majority of the legislature seats is W J ( g B) + s iJ + d + h (C B − C A) .

(2)

The positive parameter h represents the effectiveness of campaign spending, that is, how much the difference between party campaign expenditures can affect a party’s popularity. Note that if CB is greater than CA, then party B gains popularity during the electoral campaign. Otherwise, overall campaign expenditures reduce B’s popularity. Suppose now that party P announces policy gP , where P = A or B. Then a voter i in group J will prefer party A to B if W J ( g A) > W J ( g B) + s iJ + d + h (C B − CA). This comparison determines voters’ electoral decisions. A Benchmark for Welfare Comparison Suppose that party P wins the election with policy gP. Then an agent i of class J derives utility W J ( g P) + qP (s iJ + d ) + h (C B − C A ) , where θP is the party index function: θP = 1 if P = B and 0 otherwise. Suppose, moreover, that voters cannot be influenced by electoral campaign expenditures, that is, that h = 0. Then the expected utility of that voter (before the random variables are realyJ ized) reduces to W J ^ g P h = ( y − g P − c) + H ^ g P h . We want to determine y what policy maximizes aggregate welfare according to the Bentham social welfare criterion. Therefore, we should maximize W ^ g P h = / a J W J ^ g P h , J

which yields the socially optimal policy g P = g ∗ = ^H lh . This will be our benchmark for welfare comparison henceforth. Figure 7.2 presents the relative positions of g ∗P g ∗R , and g ∗ in the policy interval [, y−c]. −1

Lobbyists’ Contribution Decisions From voters’ electoral decisions, one can identify for each class J a voter who is indifferent between the two parties, who is called the “swing voter” of class J. That voter corresponds to the realization of σ iJ, defined as σ J by s J = W J ( g A) − W J ( g B) + h (C A − C B) − d .

0

(3)

y c

fig. 7.2 Relative positions of classes’ preferred policies and socially optimal policies.

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235

Therefore, the number of votes cast for party A is p A = / a J ;s J + 1 E f = 1 + f / a J s J . 2f 2 j J

(4)

If we then write W ( g A) = / a J W J ( g A) and W ( g B) = / a J W J ( g B) , the J

J

probability of party A getting the majority of seats is pA = prob [p A > 1/2] = prob [du < W ( g A) − W ( g B) + h (C A − C B)] . Equivalently, pA = 1 + y [W ( g A) − W ( g B) + h (C A − C B)] . 2

(5)

Now, by symmetry, p B = 1 − y [W ( g A) − W ( g B) + h (C A − C B)] = 1 − pA . 2

(6)

Let us now determine the total amount of campaign resources available to the parties, CA and CB. According to Zovatto’s (2003) study of eighteen Latin American countries, all fi fteen nations that adopted direct public fi nancing of electoral campaigns based at least part of the resources on party size in the previous elections. Therefore, the present chapter’s model assumes that the total amount of resources directed to a party P (where P = A or B) is proportional to P’s representation in Congress during the previous legislature. Let βP be the percentage of the total legislative seats held by party P. Then βA + βB = , and the per capita funding received by each party from the government is βP⋅c, where c is the per capita cost for the government of the public funding of electoral campaigns. As for private financing, if each class J makes private contribution C PJ to party P, the total amount of private contributions to a party P is

/ a J C PJ . J

Therefore, the total amount of contributions party P receives is C P = bP c + / a J C PJ, P = A, B . j

In order to determine group J’s private contributions to a party P, C PJ , let us analyze the interest groups’ problem. An orga nized class’s utility depends on the implemented policy, as well as on the amount of resources spent on political contributions. The present model assumes that it takes the form

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pA W J ( g A) + (1 − pA) W J ( g B) − 1 (C AJ + C BJ) 2 . 2

(7)

The first two terms in equation (7) reflect the expected economic utility of a member of class J, whereas the last term reflects the utility cost of campaign contributions. The quadratic form of the cost function models the fact that contributions typically involve not only a monetary transfer but also personal involvement of organized voters. Note that the ideological components of voters’ utilities do not appear in equation (7) because the stochastic components σ iJ and du are realized after the contribution decisions are taken and have zero expected value. Therefore, organized class J’s maximization problem is presented in the following equation, where pA is given by equation (5): max p A W J ( g A) + (1 − p A) W J ( g B) − 1 (C AJ + C BJ) 2 . 2

J CA , C BJ $ 0

Note that if the utilities an interest group obtains from platforms gA and gB are the same, then the group decides not to contribute, and C AJ = C BJ = 0 . However, if one platform gives more utility than the other, the group contributes only to the party that announces the better platform; that is, C PJ will be equal to zero for party P if gP gives less utility to the group. The solution to the interest groups’ problem is C AJ = max {0, y ha J [W J ( g A) − W J ( g B)]} , C BJ = max {0, y ha J [W J ( g B) − W J ( g A)]} .

(8)

This expression elucidates the lobbyists’ contribution decisions. Parties’ Platform Announcement Decisions Parties anticipate the contributions they will receive from interest groups by sequential rationality. It follows from (8) that C AJ − C BJ = y ha J [W J ( g A) − W J ( g B)]} , and

(9)

C A − C B = y h / (a J ) 2 [W J ( g A) − W J ( g B)] + (bA − bB) c .

(10)

J

Plugging equation (10) into equation (5), one obtains party A’s probability of obtaining a majority of votes:

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237

p A ( g A, g B) = 1 + y ;W ( g A) − W ( g B) + y h 2 / (a J ) 2 [W J ( g A − W J ( g B)] 2 J + hc (bA − bB)E .

(11)

Parties care about winning a majority of votes. However, we assume that parties also care about which policy is implemented. That is, parties have ideological preferences: party A strictly prefers policy g A , and party B strictly prefers g B . The main rationale here is that parties are committed to their founding principles, which establish their preferred political platforms. Thus announcing a platform that deviates from a party’s optimal one involves a utility loss. This loss of utility is modeled by introducing a cost of announcing a policy away from the party’s optimal one, according to the following functional form: U A ( p A, p B) = p A ( g A, g B) K − gA | g A − g A | , U B ( p A, p B) = p B ( g A, g B) K − gB | g B − g B | . The first summand of a party’s utility represents its office-seeking motivation, the pragmatic or sociotropic part of its utility. The term K represents the return to the party of gaining a majority in the legislature, so that the term is the expected utility of being a majority party. The second summand represents the utility cost that a party bears by announcing a different policy from its established optimal policy, the ideological or idiosyncratic part of its utility. There are two parts to this ideological component. First, the further away the proposed policy is from the party’s ideal policy, the costlier it is for the party. This distance is the term | g P − g P | , which represents the pure ideological bias. Second, the coefficient γP represents how strongly this deviation affects a party’s utility, and it measures the party’s ideological rigidity. For simplicity, we normalize the return K to 1. Moreover, let us analyze the parties’ preferred policies g A and g B . Because parties are created by individuals and there are only two possible preferred policies in society, one might expect those policies to coincide with the parties’ preferred ones. In fact, Fiorina’s studies (1988, 1992, 1996) suggest that parties’ optimal platforms are more extreme than society’s because of two reinforcing phenomena. First, there is a self-selection problem because founding a party is a very demanding activity, and only those who have strong and extreme policy positions are willing to bear the corresponding cost. Second, parties are old, and society has evolved over time toward the center of the political spectrum, whereas parties have kept their original, more extreme political positions. However, in this chapter, we adopt a simpler approach and assume that g A = g ∗R

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and g B = g ∗P ; that is, party A represents the rich class, whereas party B represents the poor class. Note that under this hypothesis, because party A’s preferred policy advocates a low amount of public expenditure, one expects that any deviation in the platform in order to increase pA will occur in such a way that gA will automatically increase. Therefore, one expects that in equilibrium, | g A − g A | = g A − g ∗R . On the other hand, party B will deviate from its optimal policy in such a way that gB will decrease. Thus in equilibrium, one expects that | g B − g B | = g ∗P − g B . We assume that deviation pattern in what follows and confirm it once political parties’ problems are solved. Hence the parties’ utility functions can be written as U A = p A ( g A, g B) − gA ( g A − g ∗R), U B = p B ( g A, g B) − gB ( g ∗P − g B).

(12)

When all effects of the parties’ platform announcements are introduced in the expression of pA(gA, gB) and pB(gA, gB), then sequential rationality reduces the original extensive-form game to a normal-form game between parties A and B where the utilities are given by (12). The resulting dominant-strategy Nash equilibrium is given by gu A = (H l ) −1 e

g g yt y + A o and gu B = (H l ) −1 c − B m, y y at y y at

(13)

where yt =

a P (1 + y h 2 a P) y P + a R (1 + y h 2 a R) y R y + y h 2 6(a P) 2 y P + (a R) 2 y R@ , = at a P (1 + y h 2 a P) + a R (1 + y h 2 a R)

and at = a P (1 + y h 2 a P) + a R (1 + y h 2 a R). yt yR Note that yt < y R yields . Therefore, if γA is small enough, then < y y gA yt yR + . Because H is strictly concave, it follows that gu A > g ∗R, which < y y at y supports our previous assumption about the position of the equilibrium policy gu A with respect to g ∗R . Similarly, if γB is small enough, then yt > y P yields g yt yP − B < . Because H is strictly concave, it follows that gu B < g ∗P, which also y y at y supports our previous assumption about the position of the equilibrium policy gu B with respect to g ∗P . In the present model, we assume that the ideological rigidity coefficients are small enough that the previous conditions are satisfied.

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Let us now analyze expressions (13). First note that public funds c do not enter any of the expressions for the equilibrium announcements. Therefore, public funding of electoral campaigns has no effect on the parties’ announced policies. Second, in the absence of lobbyist contributions (h = 0) and with no party ideology (γA = γB = 0), both parties converge to the same socially optimal equilibrium announcement: gu A = gu B = g ∗ . Therefore, all deviations from the optimal policy are due either to the existence of lobbyist contributions, to party ideological rigidity, or to the combined effect of both factors. Th ird, in the presence of lobbyist contributions, but with no party ideology, both parties still converge to the same announcements, but now ∗ yt gu A = gu B = g L = H −1 e o ! g ∗ . Therefore, the very presence of lobbyist groups y makes the parties announce a suboptimal policy, although there are no private contributions in equilibrium, because both parties announce the same policy. Fourth, in the presence of lobbyist contributions and parties’ ideological rigidity (i.e., positive values of h, γA, and γB), parties will differentiate themselves by announcing opposing policies with gu A < g L < gu B∗ . In this case, there will be no convergence of announced platforms, and therefore, there will be private contributions in equilibrium, which will affect the probability of each party winning a majority of legislative seats. Therefore, one may decompose parties’ decisions into two movements: first, a centripetal movement (CP) toward platform g L , and second, a centrifugal movement (CF) away from g L toward each party’s respective ideological preference, g ∗A and g ∗B (figure 7.3). The parties’ final announcements, gu A and gu B are the compositions of these two opposing movements. A balance between the search for interest groups’ support and the degree of ideological rigidity will determine the optimal announcement. Note that the higher the ideological rigidity (i.e., the higher value of γP), the higher the centrifugal movement, that is, the higher the deviation from the platform g L toward parties’ optimal platforms ( g ∗A and g ∗B , respectively):

CPA

CFA

CFB

CPP: party P’s centripetal movement, P = A, B. CFP: party P’s centrifugal movement, P = A, B.

fig. 7.3

Parties’ centripetal and centrifugal movements.

CPB

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2gu A 2gu < 0 and B > 0. Moreover, it can be shown that the more ideologically 2gA 2gB rigid a party is, the lower its probability of victory is. The Effect of Inequality on the Cost of Electoral Campaigns In order to better understand the effect of inequality on the cost of electoral campaigns, note first that each party will receive campaign contributions from at most one interest group. More precisely, party A will either receive contributions from class R or will not receive any contributions at all. Similarly, party B will either receive contributions from class P or will not receive any contributions at all. In the present two-class model, expressions (8) and (13) show that party A will receive contributions from interest group R, whereas party B will receive contributions from interest group P. As a consequence, parties’ total campaign resources take the following form: C A = bA c + a R C RA = bA c + y h (a R) 2 [W R ( gu A) − W R ( gu B)], C B = bB c + a P C PB = bB c + y h (a P) 2 [W P ( gu B) − W P ( gu A)]. Because the total amount of public contributions is defined by law and does not depend on the society’s inequality level, it remains to check the effect of inequality on total private contributions: C = C A − bA c + C B − bB c = y h " (a R) 2 [W R ( gu A) − W R ( gu B)] + (a P) 2 [W P ( gu B) − W P ( gu A)] , . An increase in inequality in the present two-class model corresponds to an increase in the share of total income of the rich class’s income and, therefore, a decrease in the share of the poor class’s income. Recall that average a P yP a R yR income is y = a P y P + a R y R; therefore, + = 1. Hence an increase y y a R yR or, equivalently, a reducin inequality corresponds to an increase in y a P yP tion in . y The relationship between inequality and campaign finance costs is determined by the next lemmas and the concluding theorem. 2 yR 2 y . Then an Lemma 1: Define β as the weighted average ^a P h + (a R) 2 y y increase in inequality yields a decrease in the value of β.

In e qual ity and the Cost of Electoral Campaigns

Proof: Write a = a R and x = b = (a P) 2

241

a R yR . Then y

yP yR + (a R) 2 = (1 − a)(1 − x) + a x = (1 − a) − (1 − 2a) x. y y

Because a = a R < 1 , it follows that 1 − 2a > 0, so that β decreases as ine2 quality (x) increases. Lemma 2: The higher the inequality, the higher the difference between the policies announced by the two parties, gu B − gu A . Proof: Recall that gu A = (H l ) −1 e

yt =

g g yt yt + A o and gu B = (H l ) −1 e − B o, where t y ya y y at

a P (1 + y h 2 a P) y P + a R (1 + y h 2 a R) y R y + y h 2 6(a P) 2 y P + (a R) 2 y R@ , = at a P (1 + y h 2 a P) + a R (1 + y h 2 a R)

and at = a P (1 + y h 2 a P) + a R (1 + y h 2 a R). yP yR yt 1 + y h 2 b . There+ (a R) 2 , we can write = y y a y g yt fore, the higher the inequality, the lower the value of . Because A and y at y gB do not depend on income, the effect of an increase in inequality on y at g g yt yt − B and on + A is a shift to the left (smaller values) that preserves y y at y y at Because b = (a P) 2

the distance between those two points. Figure 7.4 presents that shift, where the index BEF refers to the original situation (before) and the index AFT refers to the situation after the increase in inequality. Note that because g g g g g yt yt yt yt e= G + At o − e= G − Bt o = At − Bt = e= G + At o − e= G − ya ya y BEF y a y BEF y a y AFT y a y AFT gB o and the function (H l ) −1 is strictly decreasing and strictly convex, it y at follows that ( gu B) AFT − ( gu A) AFT > ( gu B) BFT − ( gu A) BFT , as illustrated in figure 7.4. Therefore, the higher the inequalities, the higher the difference between the platforms announced by the two parties. Lemma 3: The higher the inequality, the higher the difference between the utilities citizens derive from the public goods corresponding to the policies announced by the two parties, H ( gu B ) − H ( gu A ).

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fig. 7.4

Shift to the left after an increase in inequality.

g g yt yt + A o and gu B = (H l ) −1 e − B o . y y at y y at t g g y yt Therefore, H ( gu B) − H ( gu A) = (H % (H l ) −1) e − B o − (H % (H l ) −1) e + A o . t y ya y y at Proof: Recall that gu A = (H l ) −1 e

Now, by the same rationale used in lemma 2 and by the fact that (H % (H l ) −1) is a strictly convex function, it follows that H ( gu B ) − H ( gu A ) increases with inequality. Theorem: The cost of electoral campaigns is an increasing function of income inequality; that is, the higher the income inequality, the higher the cost of electoral campaigns. yJ + H ( g) for J = P, R. Therefore, the Proof: Recall that W J ( g) = (y − g − c) y yJ difference in utility for a voter from class J is W J ( gu A) − W J ( gu B) = ( gu B − gu A) y u u + [H ( g A) − H ( g B)]. Moreover, private contributions are C = y h " (a R) 2 [W R ( gu A) − W R ( gu B)] + (a P) 2 [W P ( gu B) − W P ( gu A)] , .

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Plugging in the utilities’ expressions yields R P C = [ gu − gu ] =(a R) 2 y − (a P) 2 y G + [H ( gu ) − H ( gu )][(a P) 2 − (a R) 2] . B A B A yh y y

Now, from lemma 3, H ( gu B ) − H ( gu A ) increases with inequality. Moreover, because a P > 1 > a R, (a P) 2 − (a R) 2 > 0. Therefore, the second term in the 2 right-hand side increases with inequality. Furthermore, by lemma 2, gu B − gu A also increases with inequality. Finally, it is straightforward to check that the yR yp term (a R) 2 also increases with inequality. Hence total private − (a P) 2 y y contributions to electoral campaigns increase as society becomes more unequal.

Notes 1. Authors’ calculations using data from the United Nations Development Programme (UNDP), http://hdrstats.undp.org/en/indicators/161.html and http://hdrstats.undp.org/en/indicators/91.html. The precise values are −0.42 for the 140-country sample and −0.54 for the 80-country sample. 2. Th is last hypothesis is a basic assumption of the electoral-competition model and may not reflect the richer interaction between the elected incumbent and society in the aftermath of elections. Campello’s analysis in chapter 6 presents a rich analysis of postelectoral policy implementation by Latin American incumbents. 3. In May 2011, one dollar was worth roughly 1.60 real. 4. The age classes are 16 years old, 17 years old, 18 to 20 years old, 21 to 24 years old, 25 to 34 years old, 35 to 44 years old, 45 to 59 years old, 60 to 69 years old, 70 to 79 years old, and more than 79 years old. 5. We also ran regressions using revenue per voter, revenue per candidate, and revenue per candidate, per voter, but the regressions using the total amount of revenues fitted the data better than these alternative possibilities. Th is explains why we included the number of voters and the number of candidates. 6. The education levels are illiterate, can write and read, has incomplete elementary- and middle-school education, finished elementary- and middle-school education, has incomplete high-school education, fi nished high-school education, has incomplete university education, fi nished university education, and did not inform educational level. 7. The two-class model is a simple way to characterize differences in wealth among citizens. However, it is straightforward to extend it to any fi nite number of classes. Portugal and Bugarin (2007), for instance, use a three-class approach (the rich, those of medium income, and the poor). 8. Th is is the most general way of characterizing an economic agent who also has political concerns. For more on this topic, see Ferejohn (1986), Bugarin (1999), or Bugarin (2003). 9. (H l ) −1 is the inverse function of the derivative of H. The technical assumptions are satisfied by the usual function forms of utility, such as H ( g) = g b, 0 < b < 1, or H (g) = log (1 + g) . 10. A clear example of a countrywide shock is the terrorist attack on September 11, 2001, which increased the popularity of the U.S. president from 57 in February to 90 in September. See “Poll Analyses,” Section “Gallup Poll News Ser vice,” Gallup Orga nization, September 24, 2001, http:// www.gallup.com. 11. Suppose, for example, that the country faces an economic expansion, so that society approves the incumbent for overall conduct of the economy, but the president is involved in a sexual scandal, which can affect voters differently. 12. The fi fteen countries that adopted direct public fi nancing of electoral campaigns are Argentina, Bolivia, Brazil, Colombia, Costa Rica, the Dominican Republic, Ecuador, El Salvador, Guatemala, Honduras, Mexico, Nicaragua, Panama, Paraguay, and Uruguay.

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13. See Ferejohn (1986) for a discussion of the pragmatic/sociotropic part of the utility function vis-à-vis its ideological/idiosyncratic part. 14. Note that this assumption is not essential for the model; it is sufficient that gr A is close to g ∗R and gr B is close to g ∗P . Portugal and Bugarin (2007) assume instead that gr ∗A < g R∗ < g P∗ < gr B . 15. The following discussion was originally presented in Portugal and Bugarin (2007). It is replicated here in order to foster a deeper understanding of expressions (13). 16. Detailed calculations are available from the authors upon request.

References Bugarin, Maurício. 1999. “Vote Splitting as Insurance Against Uncertainty.” Public Choice 98 (1–2): 153–69. ———. 2003. “Vote Splitting, Reelection, and Electoral Control: Towards a Unified Model.” Social Choice and Welfare 20: 137–54. Economist. 2008. “Why Elections, Even to Lowly Office, Are So Expensive.” RealPolitik. Economist, September 25. http://www.economist.com/node/12305155. Ferejohn, J. 1986. “Incumbent Performance and Electoral Control.” Public Choice 50:5–26. Fiorina, Morris P. 1988. “The Reagan Years: Turning Toward the Right or Groping Toward the Middle?” In The Resurgence of Conservatism in Anglo-American Democracies, edited by Barry Cooper, Allan Kornberg, and William Mishler, 430–60. Durham, N.C.: Duke University Press. ———. 1992. “An Era of Divided Government.” Political Science Quarterly 107 (3): 387–410. ———. 1996. Divided Government. 2nd ed. Boston: Allyn and Bacon. Persson, Torsten, and Guido Tabellini. 2000. Political Economics: Explaining Economic Policy. Cambridge: MIT Press. Portugal, Adriana, and Maurício Soares Bugarin. 2007. “Electoral Campaign Financing: The Role of Public Contributions and Party Ideology.” Economía 8 (1): 143–71. Samuels, David. 2001a. “Incumbents and Challengers on a Level Playing Field: Assessing the Impact of Campaign Finance in Brazil.” Journal of Politics 63 (2): 569–84. ———. 2001b. “Money, Elections, and Democracy in Brazil.” Latin American Politics and Society 43 (2): 27–48. UNDP. 2004. Report on Democracy in Latin America: Towards a Citizens’ Democracy. New York: UNDP. Zovatto, Daniel. 2003. “The Legal and Practical Characteristics of the Funding of Political Parties and Election Campaigns in Latin America.” In Funding of Political Parties and Electoral Campaigns, edited by Reginald Austin and Maja Tjernström, 95–114. Stockholm: IDEA.

8

Shallow States, Deep Inequalities, and the Limits of Conservative Modernization: The Politics and Policies of Incorporation in Latin America Fernando Filgueira, Luis Reygadas, Juan Pablo Luna, and Pablo Alegre

The Stage Is Set A Great Transformation and an Incipient Response

Karl Polanyi’s classic work The Great Transformation (1944) echoes in the twenty-some years following the demise of authoritarian regimes and the end of import-substitution industrialization (ISI) in Latin America. For many scholars, this transformation has been eminently political; for others, basically economic. Here we will adopt a broader perspective that encompasses the political, the economic, and the social transformation seen from the particular standpoint of classical sociological theory. In other words, we want to look at these transformations as expressions and drivers of change in the patterns of interactions, behavior, expectations, and attitudinal dimensions of the population. This perspective also seeks to understand political dynamics as a response to these changes. Indeed, we will argue that the epochal change best characterized as a process of rapid and multifaceted sociopolitical conservative modernization is the basis of the present-day shift to the left in Latin America. We borrow the term “conservative modernization” from Barrington Moore’s classic work (1966). It is a process by which certain spheres and arenas We dedicate this chapter to the memory of Pablo Alegre, a young Uruguayan scholar, former student, colleague, and a close personal friend of Fernando Filgueira and Juan Pablo Luna. Despite his premature death, Pablo’s intellectual insight, personal kindness, and persistent commitment to the collective project of improving our societies by pursuing rigorous but also socially and politically relevant research will continue to inspire us.

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of society become based on “modern” social relations (capitalist, bureaucratic, democratic) while others remain dominated by forms of elite enclosure and tradition (coercion-based social relations, traditional elite politics, status-based hierarchies), thus inhibiting the expansion of other modern dynamics. The idea of asynchronous modernization, of course, draws from a different perspective, namely, modernization theory, and especially the work of Gino Germani (1962) and Peter Heintz (1970). Heintz especially is critical to our understanding of Latin America in the past twenty years. Heintz was in a way much closer to Moore than he is usually considered to have been. Moore saw conservative modernization as the route to modernity in countries where elites allowed for industrialization and pushed education, state building, and industrial relations while attempting to maintain order and a more estamental (group-based) society through corporatist and authoritarian arrangements that included nonmarket forms of control (see Reis, chapter 3 in this volume). Heintz, on the other hand, claimed that modernity in Latin America remained uneven, granting access to certain statuses of modernity (urban dweller, educated person, industrial worker) but not to others (middle classes, certain consumption capacities, full democratic citizenship). This unevenness was not due to abstract systemic functions and equilibriums à la Parsons. In Heintz’s view, it was the direct product of the unwillingness of economic and political elites, as well as certain sectors of the middle classes (especially professional and state employees), to open up certain sources of status, welfare, and power to the rest of society. This had a direct impact on the opportunities and distribution of opportunities for social and occupational mobility. Both Moore and Heintz argued that this type of development in the late nineteenth and early twentieth centuries in Europe and in the fi rst half of the twentieth century in Latin America would eventually lead to crises of incorporation. Moore was pessimistic. The end result was fascism as a final stage of conservative modernization. Heintz was not naive. Popu lism in Latin America was one of the solutions to the crisis of incorporation. But he also was more open to alternatives. The anomic crisis that status inconsistency provoked in people could lead to populist, democratic, or revolutionary experiments. The elite project of the 1980s in Latin America known as the Washington Consensus was in many ways a project of conservative modernization: accepting and even pushing for electoral democracy and for market expansion and education expansion, but limiting the range of acceptable policies in such a way that inequality and the uneven distribution of opportunities remained a dominant feature of the region, if not a heightened one. But we will insist on the idea that inequal ity, poverty, and exclusion are not the sole bases of recent political developments; rather, they operate in combination with

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other socioeconomic transformations (urbanization, labor-market incorporation, educational advancement, and exposure to new consumption patterns) and also with one critical political ingredient: the expansion of and experience with electoral democracy during the past two and a half decades. There are five sets of indicators that in our view illuminate both the incorporation push and the incorporation failures of the past twenty to thirty years in Latin America: (1) the expansion of market dynamics and market exchange mechanisms among Latin Americans, (2) the exposure of the Latin American population to new consumption patterns and behaviors, (3) the processes of massive educational incorporation, (4) the continuing processes of urbanization and agglomeration of the Latin American people, and (5) the increasing electoral and political participation of the Latin American people. These five processes increase the need for normative and institutional channels that allow this transformed human landscape of social relations and its new contents to become directed into cooperative, coordinated, and confl ict-managed social interactions. It is precisely the failures and frailty of the institutional channels that should have provided these new norms and orientations, coupled with the legacies of marked inequalities, that allow us to understand the present-day crisis of incorporation in Latin America, as well as its recent political expressions. We believe and will try to show in this chapter that the “shift to the left” in Latin America represents the political expression of what in political sociology was termed in the 1940s and 1950s an incorporation crisis. Such crises occur when the need for cooperative interaction in markets and polities and the pressures of economic, political, and social demands from below are not being met by the political, social, and economic patterns of incorporation and regulation. The content overflows the channels. In the postwar period, this notion was applied mostly to help explain the emergence of populist leaders, movements, and parties. The emergence of a modern working class, the increasing demands of a still-small but vocal middle class, and the need to make room for large masses of rural migrants in regimes that remained politically elitist, economically limited in terms of the institutionalization of modern labor practices, and socially exclusionary created major political and social tensions in the 1940s and 1950s. The populist shift that dominated Latin American politics in these years was the clearest political expression of the incorporation crisis. We will claim that paralleling those historical events, in the 1990s a second crisis of incorporation consolidated in Latin America. In recent electoral waves, these “second crises” gave birth to their political offspring, consolidating what is known today as a regional “shift to the left.” This shift has been born of two parents (uninterrupted electoral democracies and the shortcomings—

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and achievements—of the Washington Consensus era) and sustained by a contingent road companion that has been external and economic (the commodity boom). Today the political offspring of the second incorporation crisis are taking only the first unsteady steps toward a full-blown developmental shift. It should be stressed that unlike the fi rst push for incorporation in the mid-twentieth century, this second crisis of incorporation provides a window of opportunity never before open to the region for policy alternatives. Three main variables contribute to this possibility: the legitimacy of democratic rules as an institutionalized form of conflict regulation, the changes in the global economy, and the transformation of the ideological paradigms of leftist parties and social movements. First, in the post–World War II period, the continuity of democratic rule in Latin America was very difficult, especially after the triumph of the Cuban revolution. The United States played a key role in the obstruction and blockage of reformist and leftist governments. Interventions in areas as distant as Brazil in 1964 and Chile in 1973 reflected a high aversion to reformist alternatives, even when reforms were pursued through democratic means. The contemporary international context is fortunately different from that of the post–World War II period. Second, the erosion of the Washington Consensus hegemony brought back to the front lines the issues of equality and redistribution, which had been pushed aside for more than two decades. A series of transformations in the global economy (the constitution of economic blocs and the consolidation of global markets and of new forms of international capital mobility) limited the role of nation-states in the design and implementation of economic policies. Since the 1970s and 1980s, macroeconomic policies have increasingly tended to converge, relocating redistribution policies within other institutional arenas, such as labor markets and welfare systems. Latin American countries can only now begin to distinguish this new context from the previous period, when nation-states had more space to design economic policies. Finally, the ideological renovation and electoral victories of leftist parties and movements jointly catalyze their mutation into agents that seek progressive change within democratic institutions. This creates strong incentives to seek new policy alternatives. In short, these three contextual changes create a new context that allows, but does not guarantee, the building of a new political consensus around policy innovation. In the following pages we will first concentrate on the push toward incorporation that has taken place in the past twenty to twenty-five years at both the economic and the sociopolitical level. We will also suggest how and why such processes of incorporation failed. Later we will try to link those and previous failures of incorporation to the present-day left shift in politics and policies. In that section we also want to warn the reader not to confuse

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desires with reality. A central argument of that section is that although incorporation processes can develop out of liberal democracies and market economies, that does not mean that this is the road countries will take. The challenge of building stable state policies that diminish inequality and succeed in creating a sense of inclusion can and does come in many shapes and forms. Modernity and Its Undelivered Promise: Labor-Market Incorporation, Education Expansion, Real and Virtual Consumption, and Migratory Patterns

Sociologically, Latin America has witnessed a major transformation during the past two decades. Although this transformation creates a radically different scenario of the frontiers and interactions between family, markets, and the state, it is also fundamental to understand the microfoundations of the political incorporation crisis that we describe in the next section. In other words, this social change is crucial to understanding how collective political preferences are shaped and mobilized in contemporary Latin America. The end of the ISI model and the thrust of the Washington Consensus had a radical effect on the degree to which market relations became a predominant channel through which people sought and gained a place in the world. This central transformation was joined by two additional factors to which Latin America became increasingly exposed: transformed and expanded urban landscapes and a communications revolution that through demonstration effects and digital incorporation enhanced exposure to and dissemination of new consumption patterns. We will deal further with the last two processes later, but figure 8.1 shows just how much the size of the working-age population, the weight of urban dwellers, and the extent of labor-market participation have changed in Latin America. In other words, substantially more people have been living together in cities, have been becoming potential workers, and have been openly seeking participation in the labor market. The entry of women into the labor market has also constituted a major societal transformation affecting families, firms, and markets at large (see figure 8.2). When we take a global view of Latin America in the 1990s, we see a tangible increase in both the working-age population and participation rates, but this increase is not matched by the evolution of occupation rates. This does not mean that occupation did not increase; it simply did so at lower rates than the joint evolution of age and participation rates, as figure 8.3 shows. As can be easily established, with the exception of Panama and Bolivia, Latin America either maintained its occupation rate or clearly decreased it. There is a second set of evidence that shows the frailty of labor-market incorporation. In the 1990s the expansion of occupation was accomplished mainly through the incorporation of women and through the informal economy. For

250

85

agenda setting and the politics of in e qual ity

% population 15–64

Labor-market participation rate

% urban population

80

75

70

65

60

55

50

fig. 8.1 Working-age population, labor-market participation rate, and urban population in Latin America, 1980–2005. Source: World Development Indicators data set, World Bank. Unweighted average for seventeen countries.

72 70 68 66 64 62 60 58 56 54

fig. 8.2 Female labor-market participation rates in Latin America, 1980–2006 (). Source: World Bank (2009). Unweighted average for seventeen countries.

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2001–5

98 GTM

96

MEX

PER

94

HND

BOL SLV

92

CRI ECU

PRY

90

PAN

BRA

CHI

88

NIC

VEN

URY

COL

ARG

86 84 82

DOM

80

1989–99

82

84

86

88

90

92

94

96

98

100

fig. 8.3 Net rate of occupation, 1989–99 and 2001–5. Source: Authors’ elaboration based on Cecchini and Uthoff (2007).

a sample of fifteen Latin American countries between 1990 and 2005, the informal sector grew from 47.5 to 50.3 of all workers. Only four countries have been able to reduce the percentage of informal workers in the economy: Chile, Argentina, Brazil, and, very slightly, El Salvador (Tokman 2007). The promise of incorporation into modernity through labor-market inclusion failed not because there was no incorporation, but because incorporation was fragile and precarious. Three factors conspired to produce these results. Rarely mentioned, but we believe extremely important, is the fact that those who entered the new labor market were mostly women, and thus they had the least structural power to negotiate the conditions in which they did so. Second, those who entered the labor market entered a transformed labor market: a more unequal one, with fewer guarantees and more unemployment. Third, inequality, coupled with the dismantling of the old industrial labor-based and urban-oriented welfare regimes of the past, hindered the acquisition of social rights and social citizenship. With the exception of Chile and to a lesser extent Mexico and Brazil, Latin Americans found that the more they worked for wages, the less income and/or security they had. To be more precise, until 1997 some countries experienced an increase in inequality, precariousness, and wages. After 1997 and until 2002 inequality continued, labor instability increased, and wages fell. The promise was dead. Of course, this is a somewhat unfair depiction of a period that in different countries saw important improvements in income and welfare for some part

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of the population, but it is a fair description of the overall perception that started to predominate in most countries toward the end of the twentieth century. The reason for this sometimes real gap between perception and reality has to do with issues of security and with the effect that these very improvements have in very unequal societies. Certain sectors of the middle classes and the elites had access to levels and patterns of consumption undreamed of a few years before. And everybody saw these patterns. Furthermore, many who were not benefiting from these improvements felt entitled to them. They had become urban dwellers or had been urban dwellers for quite some time. They had become more educated. But mobility measured intra- or intergenerationally seemed to have come to a halt or was attained in an extremely unstable manner. Figure 8.4 shows the momentous transformation that took place between 1995 and 2000 in consumption and exposure to new patterns of consumption in Latin America. These patterns of consumption rose first in the industrialized world and disseminated rapidly through the new technologies of information. Mobile phones, the Internet, cable television, and positional-status goods such as automobiles grew more rapidly than GDP, national income, or income of the poor and the middle classes. Here we present some basic data that deserve to be further researched and contrasted with the evolution in the access to income and other goods and ser vices. 45 40 35 30 25 20 15 10 5 0

1995 Internet users (per 100 people)

2000

2005 Mobile phone subscribers (per 100 people)

Personal computers (per 100 people)

fig. 8.4 Access to communication and information technologies, unweighted average for seventeen countries, 1995–2005. Source: Authors’ elaboration based on World Development Indicators data set, World Bank.

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Societies that go through this rapid transformation of consumption and communication based on endogenous capacities tend to be less unequal, more dynamic, and less mobility frozen than Latin America. The problem is neither the transformation of consumption behavior nor the exposure to new consumption patterns and urbanization, with their associated legitimate claims to access those goods and ser vices. The problem is the enormous gap between these promises of modernity and the capacity of a large part of the population to gain stable access to what television depicts, or to what 20 of the population actually acquires. Latin America appears frozen when it is compared with the drivers of these changes, the OECD countries. Globalization renders national frontiers irrelevant with regard to exposure to new patterns of consumption, but at the same time globalization was unable to modify rigidly unequal and relatively poor economies in Latin America so as to increase real access to virtual exposure. Furthermore, when family and work change in the direction of instability, multiple families, and multiple jobs, consumption assumes a more central role in defining one’s place in the world. Unequal societies with stable job patterns and long-term patriarchal arrangements provide males with a sense of self and inclusion and oppress women, limiting their ability to express dissent, but the new realities in which consumption becomes key and women gain some autonomy exponentially increase the effects of inequality in the perception of exclusion. As Carlos Filgueira argued in his seminal article on consumption patterns in Latin America (1981), there are mainly two forms by which a society can manage the gap between legitimated social expectations of consumption and real access. These two forms imply massive expansion of economic capacity and thus of consumption in a given country—allowing people to access what they could not before—and/or increasing fluidity in social mobility that does not provide access to new patterns of consumption to many or all but at least stratifies that access along legitimated meritocratic lines. When neither of these developments is present, unmet demands and a perception of essential unfairness start to dominate. The perception of unfairness also tends to dominate when educational mobility is larger than income and occupational mobility. This has been precisely the case in Latin America with the exception perhaps of Chile and, to a lesser extent and more recently, Brazil. Heintz (1970) had already argued that educational expansion and mobility showed much stronger dynamism than either occupational or income mobility. Carlos Filgueira (1983) documented a similar pattern for the 1970s and early 1980s. Specifically, he argued that when structural, income, and occupational mobility came to an end or slowed down, replacement mobility (or zero-sum mobility) did not pick up the tab. At the same time, educational mobility continued to advance. The end result was a system that increased expectations without providing opportunities. In the

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1990s one of the most radical transformations of society was that related to educational achievement. The emphasis on human capital formation in the 1990s did have an effect on education access and completion rates. The proportion of youth between the ages of 18 and 24 who had not completed ten years of formal education decreased dramatically in most countries. The increased completion rates for primary school, especially in the laggards of the region in the 1980s, are significant, and the percentage of people graduating from lower high school (or junior high) is also impressive. What is also important regarding mobility is the fact that especially at the primary level, social origin is becoming less salient as a predictor of completion, and thus educational mobility is increasing. Of course, the improved access and completion rates do not mean either improved occupational opportunities or that the quality of education is being more evenly distributed. The problem is precisely the reproduction of inequality within similar levels of educational credentials and the small effect of such achievement on occupational and income mobility. Th is might seem counterintuitive because differences in education have always been excellent predictors of income difference in Latin America and still are. But in the past ten years, as basic educational achievement has risen, such credentials have lost their skill premium in occupational and income levels, and skill premiums have moved to the educational credentials available only to a few (IDB 2007). In other words, education performs poorly as a tool to accompany structural mobility and even more poorly as a means to move upward meritocratically in the dynamics of replacement mobility. A final process that exposes incorporation pushes and failures relates to the urbanization process of Latin America. We have already shown the important surge of urban dwellers in Latin America between 1980 and 2006. If we zero in on the 1990s, the decade that incubated this recent incorporation crisis, we shall see that counter to certain commonsense notions, urbanization maintained a brisk pace. As ECLAC (2006) documents, between 1995 and 2000 migration from rural to urban areas involved one million people. In countries such as Guatemala, Ecuador, Bolivia, and El Salvador, rural-to-urban migration is still the most important demographic process shaping modernity in these countries. But there is another process in place that is as important as, if not more important than, the process of urbanization: the failure of urban centers to become spaces of incorporation. As the word “city” suggests, these are the spaces where unequals share a degree of equality, and where income differentials do not entail citizenship differentials. But when cities segregate, this incorporation function is lost. However, the effect of cities in democratizing expectations and aspirations is not lost; what are lost are the institutional and sociability channels, the means to fulfill expectations and aspirations. We have

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segregated the norms and means to enter modernity, not the consumption patterns that have become disseminated as the status symbols of modernity. The Push for Democracy and Its Frailty

While Latin America has been going through the massive socioeconomic changes of the past twenty-five years, it has also witnessed deep political change. In 1975 only four countries in Latin America were electoral democracies, and only one, Costa Rica, had been one for more than twenty years. In 2000 almost all countries in Latin America were electoral democracies (see figure 8.5), however wanting they might be on issues relating to liberalism (Smith 2004) or to substantive social incorporation. What is more important, between 1975 and 2005 more and more countries in Latin America elected their presidents and congressional members through open universal suffrage. Of course, it can be argued that many of these countries, after returning to democracy, went through semidemocratic or even authoritarian periods. But none of them lacked open elections once every five years at the very least. As a matter of fact, most of these countries saw an increased level of electoral participation after the institutionalization of electoral democratic procedures. At least three features made this process of electoral democratization more encompassing: the political instability of incumbents, which led to earlier elections; the greater use of direct democracy instruments, in many cases to favor (or oppose) the reelection of popular incumbents or more encompassing constitutional overhauls; and finally and especially important, electoral decentralization processes that enabled the popular election (in place of former procedures of executive designation) of subnational governments.

Peru, 1980

Uruguay, 1985

Panama, El Salvador, 1994

Brazil, Nicaragua, 1990

Ecuador, 1979

1975

1985 Argentina, Bolivia 1983

Guatemala, 1996

Mexico, 2000

1995 Paraguay, 1993

2005 Honduras, 1998

Chile, 1989

fig. 8.5 The incorporation of Latin American countries to electoral democracy. Sources: Smith (2004); Przeworski et al. (2000).

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100.0 90.0 80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0 1975

1980

1985

1990

1995

2000

2005

2010

Percentage of population entering normal exposure to electoral democracy

fig. 8.6 Proportion of population exposed to electoral democracy in Latin America. Sources: Authors’ elaboration based on World Bank population estimates for the year 2000, and data from Smith (2004) for democratic regime classification.

If we make a simple calculation, we can very grossly and through some simplifying assumptions estimate the increasing frequency of exposure to electoral promises, participation, and eventually short-term activism that the population in Latin America has experienced in the past twenty to twenty-five years. The formula is simple. If country X is democratic, we will assume one exposure to a national election. Country X has population N (for the sake of simplicity we do not consider the electoral roster, but the whole population) that constitutes proportion Z of the Latin American population. Count each country and its population, classify it as electoral democracy or not, and our chronology can be translated into the proportion of Latin Americans being exposed to competitive electoral processes. Thus for year y there are n countries with proportion Z of population times 1 if a country is classified as an electoral democracy and 0 if it is not (see figure 8.6). The curve is staggering. However, this is a curve that changes because of new entries into electoral democracy. There is another critical issue that has to be considered here: the durability of electoral democracies. Going back to Smith (2004), we can look at the duration of previous democracies and those in the past twenty-five years. Never have so many democracies lasted for so long in Latin America. This is especially true when we compare the past twenty-five years with the previous twenty-five years. As Smith shows, although electoral democracies were few in the region before the 1950s, the average duration was

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long, twenty-one years. Between the 1950s and 1970s the average duration was eleven years. After the 1970s and until the year 2000 democracies averaged almost fifteen years (Smith 2004, 10). If we exclude Mexico, the last newcomer, and we calculate the average for 2009, we are getting close to a twenty-year average. That implies an average frequency of at least four full exposures to national electoral competition for the Latin American population. In Latin America the political process and the huge inequality in the distribution of social and political resources subvert a good part of the spirit of equality that is embedded in the backbone of democratic ideals. Thus it is not surprising that although electoral democracies have endured, many have claimed that these democracies lack the substance, quality, depth, and eventually the future stability that one would expect of “consolidated” democracies. Indeed, although electoral democracies have prevailed and overtly authoritarian regimes have diminished since the 1980s, it is likewise possible to observe at least three processes that have been eroding faith in this new wave of democratic regimes: 1. Many countries in the region have confronted political crises of enormous magnitude, some of which have been rechanneled with few major problems by democratic means, whereas other countries have embarked on perilous roads of plebiscitarian democracies and “constitutional” authoritarianisms. The challenge of managing the crises can be termed “liberal stability of democracy.” At the root of this challenge is found not only the Dahlian premise of the rules of the game corresponding to the struggle for power waged by elites (Dahl 1972), but also a very significant lack of representation of party systems in many Latin American countries (see Blofield and Luna, chapter 5 in this volume; and Campello, chapter 6). 2. Indeed, in a substantial number of countries, a rising climate of citizen apathy, disinterest, and distrust in democratic mechanisms has been observed. In many cases, this opinion climate has been coupled with instances of anomic and violent protests imbued with no politically structured purpose. This challenge can be synthesized in the ideas of a crisis of political representation and of deep-seated popular alienation with politics, which, in some cases, also translates into significant instances of social anomie. 3. The paradox of democracy in the second half of the twentieth century is that although before the 1980s it meant genuine political inclusion (i.e., access to power, especially for the popu lar sectors) and the pursuit of redistribution, democracy was profoundly unstable. Since the 1980s, amid a powerful ideological deflation and growing acceptance by the relevant political players of the limits imposed by the Washington Consensus, democracy

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has undoubtedly been rendered more stable but less meaningful in terms of its potential for solving the crisis of incorporation. This problem can be defined as the absence of “significant divergence” (Campello, chapter 6 in this volume). Although this loss of “significant divergence” is also found in many countries of the North, in advanced capitalist countries it rests on levels of incorporation that are fundamental to social and civil citizenship and that are absent in Latin America. Latin American societies exhibit levels of inequality and poverty that almost two decades of democracy have failed to overcome in any meaningful way. In many cases, poverty has increased or has persisted at appalling heights, and inequality has intensified. This poses a dual challenge to the democratic future of the region: the challenge of strengthening or, rather, constructing the social pillars of democracy and that of demonstrating to the citizenry a certain social function of democracy. The second challenge does not imply the realization of socioeconomic equality among citizens, but rather the demonstration that in the long term, democracy seeks to protect the majority in times of crises and to ensure that citizens benefit in times of prosperity. As illustrated in figure 8.7, which shows the evolution of poverty in the region, the “social function of democracy” has not been fulfilled. Although the obstacles just discussed are still present, at the dawn of the new millennium, the political reality of Latin America has been considerably transformed. The two most important changes refer to points (2) and (3). The shift to the left has shown that apathy or apparent random outbursts can rapidly turn into mass mobilization with a political purpose, and that the apparent consensus on policies and limits for redistribution can be shattered at the rhetorical and in many cases the real level. The old party systems that had existed before the authoritarian period of the 1970s, and in other cases the even more stable democratic party systems that had not succumbed to the dictatorships of the 1970s, were put under siege by social and political contenders. These parties had to play the unpalatable role of final undertakers of the ISI model and embrace the complex construction of the open-marketcentric model. In the most unequal region of the world, in electoral democracies that became increasingly competitive and with a rhetoric and a model that looked at (already-shallow) states and contentious politics with open animosity, the old parties attempted the impossible: to maintain legitimacy in a democratic context and, at the same time, to renounce the state. The end result was not surprising. The Washington Consensus was tainted by patrimonial politics, which were insufficient to build stable distributional coalitions. The political landscape became more and more populated by political corpses that gave way first to semiauthoritarian leaders with market-minded technocrats and later to new parties or to old contenders that appealed to a

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100 90 80 70 60 50 40 30 20 10 0

1975

1978

1981

1984

1987

Percentage of households living below the poverty line

1990

1993

1996

1999

2002

2005

Percentage of population entering normal exposure to electoral democracy

fig. 8.7 Proportion of people living in electoral democracies and proportion of people living below the poverty line in Latin America. Sources: World Development Indicators data set, World Bank; Smith (2004); and poverty estimates based on ECLAC (2006).

rather heterogeneous social base that included the historically excluded and the recently ner vous middle classes. Carlos Menem (Argentina), Fernando Collor de Melo (Brazil), Carlos Salinas de Gortari (Mexico), and Alberto Fujimori (Peru) are part of the same crisis of incorporation that today empowers the left-leaning options. The shift to the left cannot be attributed to realignment in ideological terms. The data simply do not support this if by ideological position we mean the self-declared position on the left-right continuum. But there is quite clear evidence that there is an attitudinal change that relates to tolerance and preference for more or less unequal societies. As Blofield and Luna document (chapter 5 in this volume), between 1990 and 2000 the percentage of people asserting that their societies should be made less unequal increased in almost all the countries considered. There is no way to understand these changes unless we understand the effects that repeated, iterative exposure to and participation in mass electoral politics imply in the heads of people and in the political fabric of consensus, participation, and conflict laid out in the region. The crossroads of electoral democracy and inequality—and their side effects—are thus the first ingredient

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in understanding the crises of incorporation because they tell us the story of failed incorporation projects from above and from below.

The Script Gets Written, but Not as Writers Expected: The Shift to the Left as an Expression of Incorporation Crises After the crisis of the ISI model—a crisis that was fueled by multilateral agencies, an unstable allegiance from the middle classes, and the epochal triumph of liberal ideology—the region embarked on a particular project of (liberal democratic/market) incorporation. This was a complex incorporation attempt that ultimately failed. The failure of most market-oriented reformers to see the demise of the project indicates how little was understood about the nature of Latin Americans’ discontent and about the fabric of contentious politics that was emerging in the region. By the year 2002, responding to some disturbing data from Latinobarómetro suggesting a backlash from market reform, the Economist claimed: “Nor is it self-evident that the region is responding to recent failures by lurching to the left . Rather, there is a tendency, natural in democracies, to elect the opposition when governments fail. Even then, none of the demagogues vying to lead stricken Argentina looks like a shoo-in. Mexicans have plumped for Vicente Fox, best described as a Christian democrat, and Colombia for Alvaro Uribe, a conservative Liberal” (Economist 2002). Neoliberalism did not fail simply because of its inability in most Latin American settings to achieve stable growth, wealth redistribution, or market incorporation, but rather because it was unable to structure political incorporation by providing legitimate representation (i.e., by delivering policies and outcomes that were able to synchronize collective expectations and individual needs). These expectations and needs had been shaped by the legacies of the previous period of incorporation during which (urban) popular sectors in the region had first been incorporated. In this context, the expansion of market institutions (and their expected results in increasing welfare and access to goods and ser vices) and the extension of political rights to a significant part of the Latin American population that had either never been incorporated before or had recently been deincorporated under authoritarian regimes carried the promise of a new incorporation arrangement pursued through conservative modernization. The turns to the left epitomize the failure of this incorporation attempt. Paradoxically, the very failure of the neoliberal/liberal democratic project could also represent its most outstanding achievement, for it took to the limit and thus exposed the limits of an incorporation project based on electoral

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incorporation in the context of faulty democracies and segmented market incorporation. As a contemporary reading of Karl Polanyi’s classic work would suggest, these political regimes, and the states and societies in which they functioned, also proved unable to provide the institutional foundations that markets require to enable sustained (and equitable) growth (Kurtz 2004; Roberts 2008). The emergence of drastic political changes can be seen as the will of the people to change and as evidence of conflict. But in our view, radical political change is more systemic, and its levers are more profound. Radical change in government elites and policy menus, even if it is nonviolent, tends to be the product of systemic crises, not of conjunctural opinion waves. When deep-seated inequality meets democratic electoral politics and the expansion of market mechanisms, the perception of incorporation suffers. This is precisely what has happened in Latin America in the past twenty-some years since the end of authoritarian regimes and the experiment of the Washington Consensus. The shift to the left in Latin America is nothing more than the political expression of a crisis of incorporation. But this shift is not the state response to such a crisis of incorporation. Such a response is still in the wings, and frail wings at that. Although it is true that we cannot speak of ideological change in people’s self-definition, what are considered “adequate policies” and “central concerns” in Latin America have indeed changed. As Arditi (2008, 70) rightly points out, “The agenda setting capacity of the left reflects an important shift . . . one that seeks to shape the invisible ideology that gives an aura of reasonableness to the political center.” Furthermore, “The current standard of what constitutes the center is more clearly a creation of the left. It includes strengthening the state to regulate markets, curbing the excesses of privatization, increasing social spending . . . politicizing questions of cultural and ethnic exclusion and experimenting with new participatory channels that deepen liberal democracy or step outside of it” (71). Behind the formidable change of politics and policy in the region lurks a deeper structural transformation of society with its impact on the models and forms of incorporation and social and political order in Latin American societies. Indeed, aside from the external appearance of turmoil that Latin America presents today, underneath lies a quest for order and a search for new forms of socioeconomic incorporation and legitimate forms of political order and coercion. But this happens in a sort of chicken-and-egg fashion. Deep-seated and destructive inequalities erode state policy stability because they erode the stability of allegiances, and because people lack stable perceptions of being incorporated. Thus Latin American countries have only a crisis and governmental changes, but lack the glue that will hold the state together

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long enough for it to be able through stable policy to attack the basis of anomie, and this lack in turn erodes the chances of combating deep-seated inequalities in a way that would finally incorporate people into collective projects or at least into coordinated collaborative interaction. Regarding the switch to the left, it is possible to assert that recent electoral victories by left ist leaders share important similarities with historical responses to situations of incorporation crises and of initial stages of incorporation attempts: support by a heterogeneous social base, reliance on an anti-incumbent and anti-traditional-elite rhetoric, significant mobilization by a charismatic leadership, and a triggering event (e.g., an economic crises). There is no drastic change in ideological positioning, but rather an attitudinal change that intuitively addresses the root of discontent (inequality). Serious and durable ideological change happens only when the crisis has borne its political expression and when that political expression has been able to build a stable institutionalized coalition that supports a stable long-run set of policies that alter the basis—or some of the basis—that created the incorporation crisis in the first place. The crises of incorporation we are currently witnessing result at least in part from the neglect of stateness and state capacity as fundamental instruments (or hindrances) in achieving incorporation in Latin America. The struggle against inequality requires enduring, stable public policies that can redefine fiscal and social pacts. The functioning of democracy—its character, stability, and ability to represent as well as to delay, defer, and aggregate demands—is key to achieving these policies simply because democracies are based on a fundamental egalitarian principle in which each adult is counted equally. Authoritarian, plebiscitarian, and populist antiliberal regimes can also achieve both the reality and the perception of incorporation, and this has been proved historically on more than one occasion, as we have argued earlier. Even more, there is another option for moving toward a society where its members feel incorporated, and that is to legitimize actual levels of inequality. But if this is to be done, both the normative and the factual strengths of the democratic and capitalist ideals have to be destroyed. We believe that this is an unlikely stable outcome, but by no means an impossible short-term adventure for many Latin American countries. Either through authoritarian non-market-based solutions or through authoritarian market-based experiments, this can and has been done. The weakness of state institutions and the cyclical alternation between incorporation projects that either neglect the state (1870s–1930s, 1980s–1990s) or massively expand state intervention in the economy and society in the context of favorable international conditions (1930–1970s, 2000s) lie at the core of the pendulum movement of Latin American developmental models.

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We now turn to the analysis of current attempts to solve the region’s second incorporation crisis.

The Play Unfolds in Different Settings: The Incorporation Challenge Past and Present Meet to Define Relevant Variances

If it is true that early in the new millennium, persistent democracies, paired with the failure of the Washington Consensus, have calved left turns almost everywhere in Latin America, it is also true that in each country the left turn has produced markedly different forms of participation, representation, and incorporation, as well as diverse policy content. The divergence in the leftist models in the region can be explained by the presence of national configurations that have combined in different ways the legacies of previous incorporation projects (i.e., the ISI era and the Washington Consensus era). For this reason, there is a structural path-dependent logic that explains the type of political change observed after the Washington Consensus crisis. Each country’s trajectory jointly depends on the case-specific types of international economic integration, protection, and regulation models and the formats of political representation and incorporation that affect the shape of party systems in the new situation. The emergence of leftist governments has provoked a veritable explosion of approaches from the academy (Cleary 2006; Panizza 2005; Cameron and Sharpe 2010; Roberts 2006; Castañeda 2006; Weyland 2010; Schamis 2006; Lanzaro 2007; Luna 2010; Corrales 2008). However, these approaches differ significantly in their analytical perspectives, which affect the classification of those governments. First, many differentiate leftist governments on the basis of radically different models of presidential leadership. On the one hand, the region has seen the emergence of leaders calling for radicalized positions at the international level (primarily against the United States), advocating for nationalist and prostate policies, and confronting the business elites directly in Bolivia, Ecuador, and Venezuela, for example. They are considered “populist leaders” (Castañeda 2006) by these authors. On the other hand, there are regional leaders in Brazil, Chile, and Uruguay who display more conciliatory relationships with the United States, seek to develop market-friendly policies, and show respect to the private sector (Castañeda 2006). Second, for other authors, this distinction of two categories of the Left, though plausible, is linked to the institutional context in which these political forces are embedded (Weyland 2010; Panizza 2005; Schamis 2006). Although

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“radical-populist” leaders have emerged in countries with fragmented or virtually dissolved party systems (Ecuador, Bolivia, Venezuela), leaders with “social democratic” profi les are more common in countries with institutionalized party systems (Chile, Uruguay) or that have improved their levels of institutionalization in recent years (Brazil) (Roberts 2006; Weyland 2010; Schamis 2006; Panizza 2005). In this regard, in countries like Brazil, Chile, or Uruguay, the party system was able to channel the discontent with pro-market policies through political offerings integrated into electoral competition. The party systems in these countries went through processes of programmatic moderation, stimulated by the centripetal logic generated by these systems (Panizza 2005). Finally, a third approach reflects the tradition of political economy, which expands the explanatory variables and tries to analyze the types of export economies (Weyland 2010), the logic of political representation of these parties, or the role of organized social movements (Roberts 2006; Luna 2010). This approach argues that the dominant classification of “radical populist/social democratic” governments does not take into account sociostructural variables that combine with institutional features in long-term sequences (Luna 2010). In this line of analysis, countries with “radical populist” options had a deeper incorporation crisis. During the ISI period, these countries developed economic integration through enclave products that ensured greater stability in tax revenue but were matched by an industrialization process that was markedly slower, less intense, and asymmetrical compared with that of other countries in the region. The systems of social protection implemented there had comparatively less coverage, and significant percentages of the rural and urban popular sectors were not covered. In political terms, the process of expansion and extension of political participation was irregular. Either the existence of parties or movements integrating the popular sectors was subdued (Ecuador), or radical coalitions that tried to broaden political participation were offset by cycles of political repression and restriction (Bolivia) or neutralized by interelite covenants that ensured institutional stability at the expense of minimizing the opening of political representation in the party system (Venezuela). During the Washington Consensus phase, these countries restructured their economies by extending the opening of their main export markets, dismantling the limited social protection devices built in the previous stage, rearticulating the representation links of some of the “old” popu lar parties (the Movimiento Nacional Revolucionario [MNR] in Bolivia and, to a lesser extent, the Acción Democrática [AD] in Venezuela), or directly maintaining (in Ecuador) the exclusive and elitist orientation of the party system.

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As a result, the explosion of the market models occurred in the context of the activation of popular or ethnic movements hampered by market policies, which had not been incorporated in the ISI era. As a result, the processes of recomposition of some of the left ist parties or movements (MNR, AD) ended in their crisis and their virtual disappearance, and the whole party system was dragged behind them. In Ecuador, this process of emergence of new movements into the political arena led to the challenge of traditional elitist party systems. A second group of cases consists of Chile, Brazil, and Uruguay, where the first incorporation crises were more fully processed. These countries fall into the category of the “social democratic route” defined by the comparative literature on the left in the region. In fact, this result cannot be explained solely by patterns of partisan alignment and levels of institutionalization of party systems. In any event, these variations in institutionalization are given by certain sequences of modernization: in particular, the expansion of ISI anchored in the development of urban areas and widespread industrialization, which was at least partially controlled by a national bourgeoisie. In short, these are the countries in the region that conform to the pattern of conservative modernization as analyzed by the historical and comparative literature (Moore 1966). Additionally, unlike the Andean countries, these countries were able to develop systems of social protection with more coverage and extension, despite their dualism and stratification (Fernando Filgueira 1999). Generally, these social protection devices were accompanied by the development of processes of inclusion and social mobilization carried out either in a vertical manner and channeled through populist movements or, later, radical parties (Brazil and Chile) or by clientelistic parties that integrated low and middle segments (Uruguay). In all three cases, the process of market reforms and the transformation of patterns of political representation and social incorporation occurred in a context of more institutional stability and greater statehood. Leftist parties articulated in different ways their links with their social bases, in some cases capitalizing on the assets inherited from the ISI era (Partido dos Trabalhadores in Brazil; Frente Amplio in Uruguay). They also adjusted their programs and structures to a more moderate electoral competition. Although the thresholds and forms that adopted these processes were different in all three cases, the inherited legacies were characterized by social incorporation claims regulated by existing parties in these countries. In any case, whether they have a more liberal undertone, tend toward social democracy, or are radical populist, left-leaning governments have started to confront the legacies of inequality, the irruption of democracy, and the promise and failure of market-based incorporation through different tools that display a transformed menu of policy options, but a menu that is by no

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means perfectly consistent or evidently stable. We now turn to these different options, zeroing in on the policies that are strongly linked to welfare and distributional issues. Policy Options and Political Scenarios The Left-Leaning Liberal Tools: Conditioned Transfers and Correctives to Internal Markets in Public Services

During the 1980s and 1990s, many centrist and right-wing governments promoted a liberal strategy strongly based on the idea of markets, human capital, and state constraints as keys to foster growth and incorporation. By contrast, many of the actions taken by leftist governments can be interpreted as efforts to move away from this approach. Nevertheless, in many cases they have adopted similar tools, though with important rhetorical and in some cases practical variations (see Martínez Franzoni and Voorend, chapter 11 in this volume). Among these, the most notable are cash-transfer programs geared toward the poor and the creation of quasi-markets in the social arena. Conditional Cash-Transfer Programs Recent leftist governments have continued, extended, or launched cashtransfer programs directed toward the poor as accepted tools in the repertoire of social policies in the region. In many instances, these programs have increased the amount of assistance, providing more benefits and extending coverage. A variant of conditioned transfers is programs of monetary support for the unemployed. In Argentina, where the unemployment rate surpassed 20 after the 2001 crisis, the government developed far-reaching programs aimed at the unemployed. Amid a severe economic and political crisis, the Plan Jefas y Jefes de Hogar Desocupados (Unemployed Heads of Households Plan) was put into action, and in 2003 it covered almost two million people, overwhelmingly surpassing previous programs of a similar nature (Golbert 2004, 23–25). Initially, the project sought to be universal and temporary, but it became permanent and did not achieve universal coverage, having reached only approximately 70 of the unemployed. This limitation gave rise to implementation of projects in a clientelistic fashion through intermediaries (approximately 15 going to piquetero organizations and the rest channeled through political brokers). The plan was born out of a context of great social mobilization and, unlike other transfer programs that use a language of paternalism or human capital formation, bases itself on a discourse of social justice. It is important to highlight the relative significance of these programs in the fiscal structure of the Latin American social states. Beyond the fact that

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these programs have captured the greater part of general, technical, and academic attention, they represent no more than 1 or 2 of GDP and in general do not constitute more than 10 of total social expenditures in Latin American countries (CEPAL 2005). Quasi-Markets in Education, Health, and Social Security Another element of the liberal strategy has been the fostering of quasimarkets in the social sphere. The prototypical case is the social reforms of the Concertación governments in Chile. The pension system has been reformed to link pension levels to performance in the labor market, education vouchers have been introduced to increase competition among schools, and the labor market has been liberalized. These and other measures have spurred economic growth and have contributed to reducing poverty in Chile more than in any other country in Latin America, but they have not had the same success in the realm of inequality: Chile remains among the most unequal countries in the region. In other countries, especially in the area of health-care internal markets, voucher systems or demand-driven reforms have dominated with differing degrees of “liberal” undertones. Why have some left ist governments adopted liberal strategies and continued targeted antipoverty programs and quasi-market models instead of combating inequality through universal programs more attuned to their ideology? Their approach is probably due to a combination of various factors: (1) institutional inertia, given that these governments found these mechanisms already in place and could continue and broaden them with relative ease, without having to make any grand structural reform; (2) adaptation and learning, because some specialized programs and particularly some of the logic of quasi-markets have proved useful or at least adaptable as strides toward more structurally distributive practices, as in the case of Plan de Asistencia Nacional a la Emergencia Social (PANES) in Uruguay, health-care and education “vouchers” in Chile, and Bolsa Familia in Brazil; (3) resource limitations: targeted programs are less costly than universal ones; (4) political convenience: they grant great legitimacy at low cost; and (5) limited opposition: such specialized programs are endorsed by centrist and right-wing forces because they do not contradict neoliberal politics and appear more like residual measures than rights that could be demanded from the state. These have been some of the easiest strategies to pursue with few resources and even fewer political costs, but they seem clearly to be limited in solving the deep incorporation crises that Latin American countries are experiencing. In the following pages we will examine the new array of policy tools that in some cases look like national political strategies but at most other times constitute part of a less stable and less consistent but nevertheless substantially transformed and enhanced policy menu.

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The Social Democratic Tools: Tax Reforms and Universal Economic, Social, and Cultural Rights

The strengthening of a social democratic alternative is a novel phenomenon in Latin America (Lanzaro 2007). Historically, other leftist orientations— nationalist, populist, or socialist—have had greater relevance. There is considerable controversy over whether the governments of Tabaré Vázquez (Uruguay), Ricardo Lagos (Chile), Michelle Bachelet (Chile), or Luiz Inácio Lula da Silva (Brazil) can be considered social democratic. They exhibit many differences from European social democracies because they do not base themselves on the same class alliances or on the same institutions of the social state. Nonetheless, the growth of the middle class throughout the twentieth century, ideological readjustments after the fall of the Berlin Wall, globalization, and, above all, the consolidation of party systems and electoral participation of the Left in the most recent decades created favorable conditions for the strengthening of social democratic tendencies, which are more gradualist and more committed to representative democracy and market systems. In relation to the incorporation crisis, a social democratic strategy would be characterized by the gradual construction of citizenship through the (moderate) regulation of market allocations and an emphasis on the equalization of capacities. Attempts in recent years to establish universal social policies and tax reforms have been prominent features of this strategy. Toward a New Universalism? One of the historic demands of the Left is to guarantee the universal exercise of economic, social, and cultural rights by way of the creation of a citizenship framework that grants equality of access to basic needs. Generally, leftleaning governments employ a discourse of universal rights, but they are still far from achieving them. The Plan de Equidad (Equity Plan), launched in September 2007 by the Uruguayan government, appears to be the most articulated policy on universal social rights. It has replaced PANES, but it combines the assistive and short-term elements of the latter with an attempt to reconstruct and modernize the social state. Proposals for reform in the health and education systems are especially noteworthy, and together with tax reforms and extended pension coverage they seek to create a network of basic ser vices and social protection for all citizens, available from infancy to death. The Equity Plan includes measures that can have a considerable impact on the reduction of inequalities, chief among them a system of noncontributory social assistance that would encompass 95 of families living below the poverty line, substantial expansion of early childhood education, the extension of retirement benefits, and a series of actions to improve the quality of education at all levels.

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The design of the plan aims at a social democratic strategy of basic universalism and gradual extension of noncontributory social assistance (Andrenacci and Repetto 2006; Fernando Filgueira et al. 2006). In Chile, there has been a slide, although slow and zigzagging, from liberal positions toward some social democratic components. Since the Lagos period (2000–2006), the discourse of rights has been effectively incorporated into the design of social programs. In the area of health, the Universal Access to Guaranteed Rights plan was established to determine illnesses and pathologies to be treated universally, along with rights pursuable in court (Serrano 2005, 38; Waissbluth 2006, 42–46). Subsequently, the Bachelet government instituted the Chile Crece Contigo program (Chile Grows with You), a comprehensive child-protection system that covers the period from pregnancy up to 4 years of age. The system is universal in scope and targets assistance to the 40 of the population that is most vulnerable. The view is that by achieving greater equity in this crucial phase of the life course, one can aspire to greater equality of capacities for future development in the educational system and labor market. The great challenge for a social democratic strategy in the creation of longterm incorporation channels is the transition to systems of universal education, health, and social security that transcend the residual and welfare focus of conditional transfers and the discretionary and clientelistic character of social campaigns, as well as the fragmented, stratified, and corporatist character of the old health and social security systems. Thus far, none of the leftist governments in Latin America have managed to gain ground decisively in this area. They have been confronted with opposition by unions and with middle- and upper-class resistance to reforms in the social security systems and to extensive tax reforms that would confer financial feasibility and equity on welfare systems. Tax Reforms Tax reforms are a key component of social democratic strategies in pursuit of equality, although this area has gained relatively little ground in Latin America (see Mahon, chapter 10 in this volume). In Uruguay, a tax reform that included greater progressivity of direct taxes was approved in 2006, but its critics point out that it has taxed incomes but has not touched inheritances or business profits. In Ecuador, a tax reform is projected that would increase direct taxes of the highest-income-earning sectors. To date, none of the leftist governments in the region has achieved a social alliance that would allow for a sweeping tax reform that would provide the state with resources to embark on broad and enduring social programs that would substantially reduce income inequalities. In most cases, the tax burden represents only a meager percentage of GDP and is distributed in a regressive form. In cases where the proportion is greater, social expenditure tends to be

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high but not particularly progressive (see Filgueira, chapter 1 in this volume; and Martínez Franzoni and Voorend, chapter 11). This is due to the fact that countries with greater tax revenues tend to be those with higher spending on social security, which is generally the least progressive social expenditure. Despite these policy innovations, which represent alternatives to Washington Consensus policies, in the eyes of many Latin Americans, social democratic positions do not differ dramatically from liberal policies, in that the former make many concessions to privileged sectors and carry out their social programs all too slowly. That is why they may view other more radical options with sympathy. The Radical Populist Tools: Social Campaigns, Export Taxes, Subsidies, and Price Controls

In various countries across Latin America, there is an increasing state presence in controlling the economy and a renewed emphasis on income distribution. A distinctive characteristic of some of the recent left-leaning governments is their radical stance on the capture and distribution of wealth, in particular in a context in which incomes have risen extraordinarily because of high prices of primary products (petroleum, natural gas, metals, and agricultural products). They consider the best mechanism of equalization to be state intervention in order to redistribute wealth and offset the disparities created by the markets. Under this strategy, measures such as social campaigns, export taxes, subsidies, and price and wage controls stand out as defining features. Social Campaigns A number of governments in Latin America have organized intensive campaigns to combat poverty and exclusion of marginal urban and rural populations. The paradigmatic case is Venezuela, although similar policies have been followed in Bolivia, Ecuador, and Nicaragua. The government of Hugo Chávez, benefiting from high petroleum prices, has channeled substantial resources into civic-military campaigns designed as “missions” (see, e.g., Lander 2007, 54–57). Like cash transfers, social campaigns seek political legitimacy and incorporation, but they do so through different mechanisms. They lack a residual or targeted character and are rather defined as strategic programs endowed with abundant resources that enable a broader coverage and benefit range, including nonmonetary components. In addition, social campaigns have fostered instances of popular organization, in particular the formation of twenty thousand communal councils. Although some of the actions of social campaigns are similar to those of antipoverty policies of more moderate governments, they are joined by a radical discourse that creates other meanings and generates other expectations. Margarita López Maya, an intellectual critic of chavismo, points out that many Venezuelans who before were ex-

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cluded from social and political participation “now feel like complete citizens.” Last, their civic-military character is not based on the old institutions of the Venezuelan state. A new institutional structure is being created under the presidency that is tainted by corporatist and clientelistic overtones. Bolivia, Ecuador, and Nicaragua have initiated social campaigns similar to those in Venezuela, with assistance from the Cuban and Venezuelan governments, but with fewer resources and a more limited scope (Orellana Aillón 2006; Stefanoni 2006; Robinson 2008). Export Taxes Under the neoliberal framework, the most dynamic activities in the new export model enjoyed numerous fiscal benefits: exemptions, very low tax rates, and subsidies. This hindered local development and favored international capital. Departing from this pattern, several left-leaning governments began to tax strategic exports more heavily. For instance, in Bolivia, the government of Evo Morales inverted the percentage of taxes on hydrocarbons from the previous tax rate to one in which gains are taxed at a rate of 82. Gains from this dramatic tax increase are invested in the Amazonian-Andean Capitalism project, which seeks to transfer surpluses from the production and export of hydrocarbons to the family and community economy (Stefanoni 2006). In Argentina, the Duhalde government established a withholding tax of 35 on agricultural exports, and this continued under Néstor Kirchner. In Venezuela, high oil prices provided the government abundant resources, which were used to finance social programs and to assist like-minded governments and organizations abroad. In Ecuador, while Rafael Correa was minister of finance, he pushed for reorienting oil-export earnings toward social expenditure. He has continued this policy during his presidential tenure, increasing social expenditures in Ecuador by 15 in one year (Ramírez and Minteguiaga 2007). Although this heavy-taxing strategy contributed to increasing the popularity of these governments, it also met resistance from the middle classes, domestic business elites, and transnational corporations. In Bolivia, this type of conflict overlapped with those related to provincial autonomy vis-à-vis the central government headed by Evo Morales, given the territorial concentration of gas reserves. In Argentina, the government of Cristina Fernández de Kirchner modified the withholding system for agricultural exports, introducing a flexible, price-dependent scheme. This move raised taxes significantly. For soy exports, for instance, tax withholding climbed from 35 to 44 and at times reached 48. This prompted a wave of intense protests by agricultural producers, boosted by urban middle-class support. Social and political polarization peaked, culminating in a historic vote in the Senate (July 12, 2008) that rejected the president’s proposal and constituted a major setback for the government. In Venezuela and Ecuador, protests against export taxes also occurred.

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Taxing strategic exports, especially during a commodity boom that boosts prices for the major regional exports, is less painful than building consensus around a more sustainable and structural tax reform. Besides, although a stable coalition has yet to rise to guarantee the endurance of current export taxes, the worldwide economic recession forecast for the immediate future makes this tax strategy less sustainable in the short and medium run. Subsidies, Price Controls, and Wage Increases Some leftist governments are trying to promote incorporation through price and wage controls and subsidies. In Bolivia, the government of Evo Morales has implemented significant wage increases, 11 in 2006 and 7 percent in 2007 (Moldiz 2007, 172). In Ecuador, Rafael Correa established wage increases for public servants, teachers, doctors, and domestic servants while raising pensions and maintaining a universal subsidy for domestic-use gas and gasoline (Ramírez and Minteguiaga 2007). In Argentina during 2003–7, the Nestor Kirchner government fixed some prices and wages, as well as the exchange rate. Subsidies and price and wage controls have been most extensively applied in Venezuela. Noteworthy are price controls on basic goods, but there are also subsidies for many other products and ser vices, including an enormous subsidy for gasoline, for imports, and for foreign travel. Exchange-rate controls are also prominent in Venezuela. These measures have bolstered the egalitarian discourse of the Chávez government, but their actual efficiency in reducing inequalities is questionable because middle and upper sectors have also benefited, while unemployment persists: 2002 and 2004 saw the highest unemployment rates in Latin America in Venezuela, which continue to be in the double digits (Organización Internacional del Trabajo 2007). Venezuela also has the highest inflation rate in Latin America, in addition to shortages of basic goods and a flourishing dollar black market (Rodríguez 2008). The radical populist strategy has been the most ambitious response to the incorporation crisis created by the failures of neoliberalism in Latin America. Compared with the social democratic strategy, radical populism operates more swift ly and more aggressively to confront hegemonic sectors, reduce privileges, and deliver more resources to excluded groups. Nonetheless, it is a strategy with enormous risks and costs: it has concentrated power in the executive and has sparked intense political confrontations, and there are doubts about its political and economic viability in the medium term, beyond the boom of primary commodity prices.

Open-Ended Finale There is no doubt that Latin America has shifted to the left. Whether this left ist hegemony is a structural transformation or a more conjunctural one

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remains to be seen (in this volume, see Blofield and Luna, chapter 5; and Campello, chapter 6). What we claim are not conjunctural are the foundations of this political change and the collapse of the previous incorporation attempt: the liberal democratic and market-based push for incorporation that dominated from the 1980s to the end of the century is over. The incorporation crises that its successes and failures brought about are political realities and demands that have come to stay. Whether the solution to these incorporation crises will have the Left at the helm is a different question altogether, and we do not claim to have an answer to it. But whoever is at the helm of the new incorporation movements that are being attempted and will take shape in the near future will have to address the inherent contradictions created by the democratization of expectations and political procedures and a social landscape heavily permeated by enduring and deep-seated asset, opportunity, and outcome inequalities. Much of the literature on the left turns has dealt with the differences in this shift to the left: social democratic and populist; carnivore and vegetarian. We have tried to look not just at the relevant variations but also at what we believe is the common fuel behind this transformation of politics and policies: a growing gap between the expansion of dynamics that democratize and legitimize aspirations of consumption, mobility, and status attainment (democracy, urbanization, educational attainment, exposure to consumption patterns) and the frozen landscape regarding the dynamics needed to democratize the capacity to satisfy those new, extended, and growing aspirations (occupational structure, asset redistribution, welfare guarantees, income redistribution). We believe that our chapter also suggests an answer to those who from different sides of the aisle are scratching their heads in an attempt to understand what has just happened and, especially, why it has happened. For many scholars, the shift to the left came as a surprise because they believed that the capacity of the people, social movements, and historical subjects to emerge and challenge the Washington Consensus was nowhere to be found. Industrial relations destroyed, a state with no capacity to operate, a decaying middle and working class, a service-oriented economy that atomized interests, and a profound ideological crisis of the Left conspired against a collective and political project that would successfully challenge the Washington Consensus. For others, such a challenge should not even be sought, because the market-based liberal experiment was a good one. Economic growth, export expansion, access to durable goods, educational advancements, continuing urbanization, and modernity in consumption were evident signs of progress across the region. Why would Latin Americans want to challenge this experiment? But the Latin American people did challenge the neoliberal experiment. We believe that our explanation provides an answer to both sides of the debate. It

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does not claim that it was the intolerable degree of inequality that made the region rise and fight, or that the shift to the left is simply an electoral downturn of a still-dominant project because of the 2002 economic crises. It does not state that people rose to the challenge because of the utter and complete failure of the incorporation attempt. It is precisely because in some areas there were advances (enduring electoral democracy, democratization at the subnational level, urbanization, education, and access to new communications technology with its impact on exposure to patterns of consumption) that the failure of the democratization of opportunities, income, and assets became all the more salient. That is why we claim that this crisis of incorporation represents the limit of the project of conservative modernization. Without a more profound redistribution of material welfare and a more truly meritocratic access to mobility channels, the region will remain profoundly politically unstable because there is for the Latin American masses no waiting for the pot of gold at the end of the rainbow. They have seen the whole rainbow, they know there is no gold at its end, and they just want to be able to walk the rainbow with chances of success similar to those of persons who for so long have owned every color in it. We do not know how this is going to happen. This chapter does not provide many clues about the position of economic elites and political elites and the chances for positive-sum games toward the construction of fiscal and distributive pacts. The preceding section has gone over the different tools and strategies that countries are trying, but it does not delve deeply into the political economy of these games. That is a matter for another project, which much of the literature looking at relevant variation in the politics of the shift to the left is carry ing out. Our purpose was antecedent to this other task. If the shift to the left is not fueled simply by contagion and domino effects, and if it did not grow out of a global shift in ideology, then what are the common sociopolitical roots of this transformation? We hope that the answer we provide here contributes to a broader, longer-term understanding of this important transformation of politics and policies in Latin America.

Notes 1. These countries were Colombia, Costa Rica, Venezuela, and the Dominican Republic. 2. As Smith (2004) rightly argues, Peru, Ecuador, Venezuela, El Salvador, and Guatemala went through semidemocratic and even overtly authoritarian spells of one or two years during the periods that we call electoral democracy. His additional claim that in many cases we are in the presence of increasingly illiberal democracies is also well taken. But as he and others also recognize, these caveats are not intended to downplay the epochal change that the shift to electoral democracies has implied in most of the region. 3. Th is section draws on Luna and Filgueira (2009). 4. The combination of markets and liberal democracy achieved different results across Latin America. Th is is therefore a broad and quite possibly unwarranted generalization with which we concur for the sake of argument.

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5. See also Roberts (2008). 6. Th is section draws heavily on Reygadas and Filgueira (2010). 7. Adapted from Robinson (2008, 12); original: “Ahora se sienten como ciudadanos completos.”

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IDB (Inter-American Development Bank). 2007. Annual Report 2007. Washington, D.C.: Inter-American Development Bank. Kurtz, Marcus J. 2004. “The Dilemmas of Democracy in the Open Economy: Lessons from Latin America.” World Politics 56 (2): 262–302. Lander, Edgardo. 2007. “Venezuela: Logros y tensiones en los primeros ocho años del proceso de cambio.” In Gobiernos de izquierda en América Latina: Un balance político, edited by Beatriz Stolowicz, 39–76. Bogotá: Ediciones Aurora. Lanzaro, Jorge. 2007. “La ‘tercera ola’ de las izquierdas latinoamericanas: Entre el popu lismo y la socialdemocracia.” Encuentros Latinoamericanos 1 (1): 20–57. Luna, Juan Pablo. 2010. “The Left Turns: Why They Happened and How They Compare.” In Latin America’s Left Turns: Politics, Policies, and Trajectories of Change, edited by Maxwell A. Cameron and Erik Hershberg, 23–40. Boulder, Colo.: Lynne Rienner. Luna, Juan Pablo, and Fernando Filgueira. 2009. “The Left Turns as Multiple Paradigmatic Crises.” Third World Quarterly 30 (2): 371–95. Moldiz, Hugo. 2007. “Bolivia: Crisis estatal y proceso de transformación.” In Gobiernos de izquierda en América Latina: Un balance político, edited by Beatriz Stolowicz, 155–96. Bogotá: Ediciones Aurora. Moore, Barrington, Jr. 1966. The Social Origins of Dictatorship and Democracy: Lord and Peasant in the Making of the Modern World. Boston: Beacon Press. Orellana Aillón, Lorgio. 2006. Nacionalismo, populismo, y régimen de acumulación en Bolivia: Hacia una caracterización del gobierno de Evo Morales. La Paz: CEDLA. Organización Internacional del Trabajo. 2007. Panorama laboral América Latina y el Caribe, 2007. Lima, Peru: OIT. Panizza, Francisco E. 2005. “The Social Democratisation of the American Left.” Revista Europea de Estudios Latinoamericanos y del Caribe 79:95–103. Polanyi, Karl. 1944. The Great Transformation. New York: Farrar and Rinehart. Przeworski, Adam, Michael E. Alvarez, José Antonio Cheibub, and Fernando Limongi. 2000. Democracy and Development: Political Institutions and Well-Being in the World, 1950–1990. Cambridge: Cambridge University Press. Ramírez, Franklin, and Analía Minteguiaga. 2007. “El nuevo tiempo del Estado: La política posneoliberal del correísmo.” OSAL 7 (22): 87–103. Reygadas, Luis, and Fernando Filgueira. 2010. “Inequality and the Incorporation Crisis: The Left’s Social Policy Toolkit.” In Latin America’s Left Turns: Politics, Policies, and Trajectories of Change, edited by Maxwell A. Cameron and Erik Hershberg, 171–92. Boulder, Colo.: Lynne Rienner. Roberts, Kenneth. 2006. “Latin America’s Populist Revival.” Unpublished paper, Department of Government, Cornell University, Ithaca. http://www.einaudi .cornell.edu/latinamerica/conference/left turn/pdf/Roberts.pdf. ———. 2008. “The Mobilization of Opposition to Economic Liberalization.” Annual Review of Political Science 11:327–49. Robinson, William. 2008. “Transformative Possibilities in Latin America.” Socialist Register 44:1–19. Rodríguez, Francisco. 2008. “An Empty Revolution: The Unfulfi lled Promises of Hugo Chávez.” Foreign Affairs 87 (2): 49–62. Schamis, Hector E. 2006. “Popu lism, Socialism, and Democratic Institutions.” Journal of Democracy 17 (4): 20–34. Serrano, Claudia. 2005. La política social en la globalización: Programas de protección en América Latina. Serie Mujer y Desarrollo 70. Santiago, Chile: United Nations/ CEPAL. Smith, Peter. 2004. “Cycles of Electoral Democracy in Latin America, 1900–2000.” Working Paper 6, Center for Latin American Studies, University of California, Berkeley.

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Stefanoni, Pablo. 2006. “De la calle al palacio: Los desafíos de la izquierda boliviana.” Entre Voces 5:69–72. Tokman, Victor. 2007. Informalidad, inseguridad, y cohesión social en América Latina. Serie Políticas Sociales 130. Santiago, Chile: United Nations/CEPAL. Waissbluth, Mario. 2006. “La reforma del estado en Chile, 1990–2005: De la confrontación al consenso.” PUBLIC 8 (March). http://www.mariowaissbluth.com /descargas/reforma _estado_chile _1990_2005.pdf. Weyland, Kurt. 2010. “The Performance of Leftist Governments in Latin America: Conceptual and Theoretical Issues.” In Leftist Governments in Latin America: Successes and Shortcomings, edited by Kurt Weyland, Raúl L. Madrid, and Wendy Hunter, 1–27. Cambridge: Cambridge University Press. World Bank. 2009. “World Development Indicators.” In World Bank electronic resources data set WDI. Washington, D.C.: World Bank. http://data.worldbank .org/data-catalog/world-development-indicators.

9

Gender Equality Policies in Latin America Merike Blofield and Liesl Haas

Introduction In this chapter, we examine gender equality policies, or women’s rights policies, as a case study of whether and how high socioeconomic inequalities affect agenda setting and policy outcomes in a concrete policy area. Women’s rights policies are a good case study for a variety of reasons. First, women’s rights affect 50 of the population directly and virtually everyone indirectly. Second, women’s rights encompass a broad array of policies, touching on virtually all policy areas of the state. Third, women’s rights policies do not by definition imply economic redistribution; rather, this depends on the type of issue, and hence there is variation on this front. Finally, gender equality has been identified as critical to democratic consolidation and the quality of democracy, as well as to economic and social development. At the time of democratization in the 1980s, Latin America lagged far behind the rest of the Western world on women’s rights. Therefore, during and after the transitions, women’s organizations mobilized across the region to demand equal rights and an end to discrimination. Indeed, during the past two decades and across the region, many of the more egregious legal statutes condoning explicit discrimination have been overturned, and in many areas women have succeeded in gaining legal recognition and equality, particularly in the areas of family law, political representation, and the criminalization of The authors are grateful for insightful comments made by participants at the University of Miami Political Science Colloquium on a draft of this chapter. Our chapter draws heavily on and summarizes the fi ndings of three major research projects by the authors on women’s rights in Latin America and thus is more a survey of extant research on the topic than an original data analysis solely for the purposes of this book. The discussion of independent variables draws heavily on Liesl Haas’s 2010 book Feminist Policymaking in Chile. The discussion of domestic workers draws heavily on Merike Blofield’s forthcoming book Carework and Class, and the discussion of abortion draws heavily on Merike Blofield’s 2006 book The Politics of Moral Sin and her 2008 article “Women’s Choices in Comparative Perspective.” The full sources are listed in the references.

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domestic violence, even if proactive enforcement has been slower to come. Significant strides have also been made in the educational achievements of women and their entrance into professional labor markets. Latin American women have reached almost the same level of education as men, and in Argentina and Brazil, for example, more women graduate from university than men. More than half—53—of women in the region today work in the paid labor force, up from 32 in 1990; for women aged 20 to 40 years, this figure reaches 70 (UNDP/ILO 2009). In the Argentine and Costa Rican legislatures, with quota laws, 39 and 37 of legislators in the lower house are women, respectively, and most countries in the region are above the United States’ comparatively low average of 17 (Inter-Parliamentary Union 2009). Even the highest posts have opened up to women; both Chile and Argentina were headed by female presidents in 2009, and Costa Rica elected its first female president in February 2010. That said, entrenched obstacles to gender equality in Latin America remain. Women’s continued responsibility for reproduction and family and child-care needs disadvantages them vis-à-vis men and makes it much more difficult for them to compete on an equal level in the labor market. Although middleand upper-class women can resolve this burden by outsourcing many of their domestic responsibilities, high socioeconomic inequalities and a dearth of adequate social policies all reinforce this burden for low-income women. Moreover, some of the most explicit gender-based discrimination continues on issues that have significant class-based effects, that is, where poor women’s rights and interests are most strongly affected. In this chapter, we examine three cases of women’s rights policies that are critical for gender equality: domestic violence, domestic workers’ rights, and abortion. All three issues are historically “invisible,” but they are substantively very important for women’s lives and affect a significant share of women in Latin America (as will be discussed later). Moreover, at the time of democratization, all three issues remained unaddressed, a situation that caused significant discrimination against women as a group. Domestic violence was not considered a crime; domestic workers had legally longer work hours and lower benefits than other workers across the region (up to 96 hours a week in Mexico, Peru, and Guatemala and up to 104 hours a week in Bolivia); and abortion was illegal across the region, with the exception of Cuba. However, the issues differ on two key dimensions: (1) whether they are distributive or regulatory, and (2) whether they elicit organized opposition, for instance, on religious grounds (Blofield and Haas 2005; Fraser 1997; Htun and Weldon 2010). These two dimensions identify where opposition to reform is likely to come from. The cases thus present good examples through which to examine whether and in what ways socioeconomic inequalities and class divisions influence policy outcomes on gender equality in Latin America.

280 Table 9.1

agenda setting and the politics of in e qual ity Women’s rights policies along two dimensions

Domestic violence Domestic workers’ rights Abortion

Redistributive

Church opposition

No Yes No

No No Yes

Our typology in table 9.1 classifies gender equality policies along these two key dimensions: economic redistribution and religious opposition. The first dimension encompasses two dynamics. The first is whether the policy area requires redistribution of resources across classes. In Latin America, any policy that threatens the interests of the elites is likely to face an uphill battle; the same applies to gender equality policies. Relatedly, we consider whether the policy area requires significant outlays on the part of the state to implement it. Here, implementation can be progressive (it decreases socioeconomic inequalities) or regressive (it increases inequalities), or it can maintain the status quo (it keeps inequalities at their current levels). The second dimension refers to whether the particular policy area elicits doctrinal opposition from an institution, such as the Catholic Church. Church opposition, given the extensive political influence of the Catholic Church in Latin America, is highly problematic for gender equality in a policy area that touches on Catholic doctrine. In effect, this classification yields four different types of gender equality policies. Our case studies span three of these four types of gender policies. (We do not have a case of a gender policy that elicits unified church opposition and is also a redistributive threat to elites. Such issues may exist, but none have emerged to date in public discussions of gender inequality.) As table 9.1 indicates, the criminalization of domestic violence per se does not threaten class interests, and in fact, the problem of domestic violence cuts across class lines. (However, the effective implementation of domestic violence laws does require state resources.) In addition, the church does not have a unified doctrinal stance against the criminalization of domestic violence. This issue has thus presented a more auspicious opportunity for policy reform than either abortion or the rights of domestic workers. The equalization of domestic workers’ rights, by contrast, directly threatens the interests of middle- and upper-class families. Even though the church is not opposed to it and there is no morally legitimate opposing discourse to equal rights in the democratic era, political elites have privately remained strongly opposed to equalizing rights. Finally, legalization of abortion does not threaten class interests and can even save state resources, given that complications from illegal abortions are the primary public health crisis in many countries. However, church opposition to reform is vehement.

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This typology illuminates where the opposition to reform is likely to be strongest. The strength and type of opposition will affect the strategies that social and political actors use to promote their proposals for reform. Beyond this typology, the extant literature has identified a set of independent variables that have been shown to promote gender equality policies across the world and in Latin America. These include the strength of a country’s feminist movement, the existence and political influence of a country’s women’s rights agency (or women’s policy machinery [WPM]), the strength of the political Left within the government, and the number of women in policy-making positions. Finally, we also discuss the international context, which is not an actor per se, but which influences actors’ strategies. In the following section, we discuss these variables and consider whether and how they are influenced by socioeconomic and class inequalities in Latin America.

Explaining Gender Equality The Impact of Feminist Movements

Before an issue can be seen as a legitimate domain for public policy, it must first be seen as a political issue. Organized women in civil society are most often responsible for the politicization of gender equality. A broad range of comparative literature on women and politics concludes that an active women’s movement, and specifically a feminist movement, is a critical force for policy change. In Latin America, the widespread participation of feminist movements in politics dates to the 1970s, when women organized politically in many countries in response to authoritarian rule. This political context influenced the major issues on which feminists in those countries focused, as well as the way those issues were framed. In Latin America, women’s movements argued for a return to democracy and respect for human rights, and also for “democracy in the home.” This connection between women’s rights and the larger political context was most explicit in the decision to link the violation of human rights under the dictatorships to the violence women suffered in the home. In Argentina, Brazil, Uruguay, and Chile, domestic violence became the first major policy issue that feminist movements pursued after the transitions to democracy. Across Latin American countries, one of the most noteworthy victories for feminist movements was the creation of national-level ministries devoted to women’s rights. In countries like Brazil and Chile, these agencies were able to support feminist efforts by pushing for policy reforms on such issues as domestic violence and sexual assault. But feminists continue to be ambivalent about working with the state because they fear that close cooperation is likely to result in the co-optation of the feminist policy agenda.

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This concern has taken on greater weight as the terrain in which feminist organizations try to affect government policy has shifted in favor of “professional” feminist organizations and nongovernmental organizations (NGOs). This shift has been particularly dramatic in Latin America, where transitions to democracy in the 1980s, combined with a United Nations focus on gender, created an unprecedented opportunity for feminists to participate in politics. Th is shift has exacerbated tensions within feminist movements. Scholars such as Clark, Friedman, and Hochstetler (1998) and Keck and Sikkink (1998) contend that this “NGOization” has had important negative effects on Latin American feminism, draining leaders from grassroots organizations and reducing the political influence of the larger movement. Alvarez (1998) believes that NGOs are not necessarily deradicalizing or demobilizing for the feminist movement but can form a vital link between the base and policy makers. But throughout Latin America, feminist organizations, which should form the backbone of social support for gender equality policies, are often in practice divided along class lines, and this division makes it less likely that feminists will unify around issues that either have a significant redistributive impact or do not strongly affect them. The high inequalities in Latin America make it harder to foster cross-class solidarity among feminists and women more broadly. As mentioned in the introduction to this volume, class divisions can produce a “dualist world” (Karl 2000, 153) where forging a sense of “common belonging” between classes (O’Donnell 1998, 55) is exceedingly difficult. In conditions of stark economic inequalities and class divisions, middle- and upper-class women— and men—simply may not see their lower-class counterparts as social equals, and it is hard for feminists (or other reformers) to mobilize a critical mass of activists for causes based on solidarity. As we discuss later, the issue of domestic violence is a rare case of a policy issue that united women across class lines because it affects elites as well. More commonly, middle- and upper-class women tend to prioritize issues that most urgently affect them, while the concerns that most directly affect poor women are marginalized and do not become rallying points for mobilization by middle- and upper-class women. In sum, women cut across class lines (Blofield 2006; Htun 2004). The end result is that middle-class or elite groups of women, including those in professional feminist NGOs, rarely take on issues of working-class and poor women unless they overlap with middle-class or elite concerns. Executive Agencies for Women’s Rights

Arguably the most obvious sign of institutional openness to gender equality policies is the existence of an executive agency for women’s rights. Situating a permanent institution within the state to monitor and promote women’s

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rights creates enormous potential to promote policy reforms, but the effectiveness of such an agency will depend on its internal structure, including its ideological composition; its level of independence (particularly budgetary); its relationship with the rest of the bureaucracy and with the legislature; and the level of access it grants to outside groups. Furthermore, such agencies have in practice often reflected the class divisions affecting women’s organizations in civil society. A well-functioning WPM can help ensure that government policies across issue areas integrate a consideration of both the gendered dynamics of socioeconomic problems and the gendered impact of potential government policy solutions. At the same time, a key challenge in the creation of an executive-level WPM is to link the institution to other relevant government agencies. Otherwise, such agencies can become ghettoized within the government, without influence or input in policies that are seen as the domain of other ministries (such as education, health, or labor). In addition, although such agencies can help monitor and promote women’s rights from within the state, conservative governments may also co-opt these agencies and use them to block progressive policies initiated by other government agencies or by outside groups, or they may even disband the agencies. Two Latin American cases illustrate this point with particular clarity. In Uruguay and Peru, national women’s ministries survived only a few years in the 1990s before being disbanded following a change to a more conservative government. In Uruguay, a ministry was recreated (the National Women’s Institute, or Inmujeres) following the election of a left-wing government in 2004. In Peru, the Instituto Trabajo y Familia (ITF) was created in 2002, under the leadership of María del Pilar Nores Bodereau de García (who became first lady following the election of Alan García in 2006). The stated goal of the ITF is to strengthen Peruvian families, particularly through antipoverty initiatives. It is not an explicitly feminist organization and has weak links to the country’s feminist community. In Latin America, a number of countries have created WPMs during the past two decades, and a burgeoning literature examines their effectiveness. Although the policy impact of these agencies varies widely across the region, cultural and political opposition to these agencies remains higher in Latin America than in the advanced industrialized democracies. Moreover, in some countries the political reluctance to address feminist issues is compounded by larger problems of institutional instability, as well as ongoing economic crises, which lower the priority of women’s rights for the government. The ambivalence toward these agencies, particularly by political conservatives, is reflected in the varying degrees to which the WPMs exist as independent agencies that can focus exclusively on women’s rights. Some agencies are independent ministries, such as the National Councils for Women’s Rights in Brazil and Venezuela’s Ministry of Women’s Affairs. In most Latin American

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countries, the agencies fall under the jurisdiction of other executive ministries. Th is is the case with Chile’s SERNAM (National Women’s Ser vice), which falls under the jurisdiction of the Ministry for Cooperation and Planning; Bolivia’s Subsecretary for Gender (under the National Secretariat for Indigenous Issues, Gender, and Generations); Nicaragua’s Women’s Institute (under the Office of the President); Costa Rica’s National Center for the Development of Women and the Family (under the Ministry of Culture, Youth, and Sports); and Colombia’s Presidential Council for Women’s Equality (under the Office of the President). Where women’s agencies are subject to the direction of other agencies, their ability to promote women’s rights within the government is limited. But even independent agencies are considered low-status ministries within the government (with corresponding low-status budgets), and they struggle to legitimate the theme of women’s rights to the rest of the bureaucracy. As indicated by the titles of some agencies, in some cases women’s rights agencies are combined with ministries or subministries focusing on children and the family, and it is difficult for government officials to promote policies that expand women’s equality outside their traditional roles within the family. Leadership is a key factor in an agency’s political influence, as is the overall ideological orientation of the agencies (Baldez 2001; Franceschet 2005; Haas 2010). Latin American WPMs have tended to be able to take on a more ambitious agenda when the Left is more influential within the government. A common criticism of WPMs in Latin America, particularly in the most successful cases, such as Chile’s SERNAM, is that these agencies tend to tap the same professional (middle-class) NGOs repeatedly for technical assistance. Middle-class NGO leaders argue that they are better able than grassroots “women’s organizations” to formulate policy proposals, but this policy-making dynamic not only excludes poor women from the process but also marginalizes the issues that disproportionately affect poor women. On the other hand, when the state targets poor women, it is often as passive recipients of aid (as in the conditional cash-transfer programs in use in many countries, discussed in chapters 8 and 11 of this volume) rather than as participants in the policy process. To complicate matters further, such programs often do not enjoy support from organized feminist groups, who view them as reinforcing women’s traditional roles as caretakers of home and children. Not surprisingly, the larger political context within each country plays a significant role in shaping a WPM’s agenda. As we discuss later, early political action by many WPMs focused on domestic violence, not only because it was a central policy concern for women’s movements throughout the region, but also because it was an issue that did not provoke strong opposition from economic elites, political conservatives, or the Catholic Church. By contrast, WPMs have generally avoided discussions of abortion, which arouses opposition even within sectors of the Left, given the vehemence of church opposition, and is an issue where strong, visible public support for reform is

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lacking. Some WPMs, such as Costa Rica’s National Women’s Institute (INAMU) and Chile’s SERNAM, have supported efforts to advance the rights and/or working conditions of domestic workers. However, when they do focus on this issue, they tend to focus on less controversial areas such as professionalization of domestic workers, as SERNAM has done in Chile, rather than on more conflictual areas such as working hours. Political Parties and Ideology

Adoption by the political parties of a feminist policy agenda is a critical requirement for sustained political attention to women’s rights. Existing research concludes unanimously that regardless of electoral system and institutional design, the political Left is more supportive of gender equality. But although the Left appears more open ideologically to women’s rights issues than the Right, the relationship between feminists and the Left is not simple or straightforward. Traditional leftist parties, as well as unions, have historically harbored traditional views on women and have prioritized issues of class over gender inequality (Elman 1996; Hoskyns 1996). For example, Haas (2001) and Macaulay (2003) argue that although the Brazilian Workers’ Party is more open to women’s participation and more supportive of gender equality than other Brazilian parties, feminists within the party have struggled with other party members over the party’s position on women’s rights issues. Nevertheless, the Left historically has encouraged women’s political participation, which has given women the opportunity to agitate for change on these issues from within the political parties. In fact, much of the openness to women’s rights we see globally in left-wing parties is the result of intense work by feminist party members to force incorporation of these issues into party platforms. Left-wing parties are, of course, more focused on socioeconomic inequality than other political tendencies. One would therefore expect that left-wing parties would not shy away from acknowledging the socioeconomic nature of gender inequality or from promoting policies to address the particular needs of poor women. But the reality within the Left is frequently more complex. Not only do feminists clash with traditional left-wing groups over party policy, but also, not all women in the Left identify as feminists. More important, even for feminists within the Left, on issues of gender equality, the concerns of middle-class feminists often take precedence over gender issues that have significant class-based, redistributive effects. Gender Quotas and Women’s Representation

Many proponents of gender equality blame the lack of policy reforms on women’s underrepresentation in positions of political and policy influence. Given the low representation of women in politics in the region, feminist

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representatives have pushed for minimum quotas for women’s representation. During the past decade and a half, roughly half of Latin American countries have established some form of so-called gender quotas for elected offices. Despite problems with implementation and debates about the details of the quota laws, where these laws have been implemented, women’s representation in the legislature has increased (Caul 2001). However, an examination of women’s access to political power illustrates the ways in which class inequalities exclude poor women from decisionmaking positions, even in countries with institutionalized mechanisms for increasing women’s representation in government. Class inequalities mitigate the effectiveness of gender quotas in two primary ways. First, class divisions largely limit these new positions to middle- and upper-class women because of the internal composition of the political parties and the nature of their candidate selection processes. To varying degrees across political parties, including leftist parties, poor women participate in much lower numbers within the parties and rarely gain access to party leadership positions (Haas 2010). Indigenous and black women, who are disproportionately poor, are as a result also severely underrepresented in legislatures across the region. Poor and working-class women lack the education, resources, and time to participate in political parties, and thus their involvement with formal politics is limited even in cases where parties are ideologically more open to their participation. As a result, although more women have been elected across the political spectrum in countries with quotas, these women are not descriptively representative of all the women in their societies. Second, much of the gender-quota literature assumes a degree of commonality among women on policy. Weldon (2002) argues that assumptions about women’s policy preferences rely on essentialized notions of “women’s interests,” and that women as a group show more variation in political ideology than do women and men within a particular political party. Mansbridge (2005) argues that the affinity for certain types of policies comes from the personal experiences of legislators, not inherent biological differences between the sexes. The differing “personal experiences” of legislators are, of course, profoundly influenced by social class, as they are in feminist movements in civil society. As a result, the presence of lower-income women in policy-making positions can be a critical factor in determining whether reforms focus on gender equality policies that have redistributive effects. Many of the difficulties in investigating the existence of a gendered set of political interests are due to the imbalance in the number of women elected from different ideological backgrounds. Globally, women have had much more success in gaining political office through the parties of the Left. Recent work on political participation and activism by conservative women (e.g., Bacchetta and Power 2002; Baldez 2002; González and Kampwirth 2001)

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confirms women’s political complexity and raises a warning against easy assumptions about the effect of women’s political presence. Indeed, on both abortion and domestic workers’ rights, opposition to reform has often come from female legislators (Blofield 2006, 2009). In practice, the lack of class unity among women (or men, for that matter) often inhibits the formation of the types of political alliances that could push for policy reform, not only on women’s rights but also on redistributive issues more broadly. The International Context

The larger international context surrounding a particular gender equality issue does not play a determinative role in debates about policy reform. However, international norms and transnational networks can bolster or obstruct the position and relative influence of domestic political alliances pushing for policy change. Of the policy issues reviewed here, domestic violence provides the clearest example of an international context favoring domestic policy reforms. Latin American country delegations have participated in United Nations conferences (such as the Fourth World Conference on Women in Beijing in 1995) where violence against women was a major focus. Particularly following the transitions to democracy, Latin American governments faced pressure to become signatories of international agreements, such as the Convention for the Elimination of All Forms of Discrimination Against Women, (CEDAW, adopted by the UN General Assembly in 1979), and later regional agreements, such as the Inter-American Convention on the Prevention, Punishment, and Eradication of Violence Against Women (the Convention of Belem do Pará, passed by the Organization of American States in 1993). Almost all Latin American countries have by now ratified both agreements, and as we discuss later, all have made some legal reforms to strengthen women’s protection against violence. By contrast, abortion presents greater challenges to policy-reform efforts in Latin America because of the strong opposition of the politically powerful Vatican. The Vatican has been a very active player at international conferences because of its permanent observer status at the United Nations and has managed to keep abortion largely off the agenda of United Nations conferences on women and on population and development. It has also, along with national branches of the Catholic Church, lobbied domestic governments to outlaw therapeutic abortion (to save the life or health of the woman) and has succeeded in doing so in El Salvador, Nicaragua, and the Dominican Republic. No similar international force exists that advocates for reproductive rights. The rights of domestic workers, on the other hand, are also bolstered by the international legal context. As we will discuss later, legal discrimination against domestic workers contradicts several treaties (for example, CEDAW, as well as

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numerous International Labour Organization treaties that virtually all Latin American countries have signed). However, the lack of strong domestic advocates has contributed to the political invisibility of these workers and to keeping reform under the radar in most countries. This indicates that although the international context is important, it is not a determining factor, and domestic forces play a key role.

Case Studies The following case studies illustrate the class divisions that underlie three critical policy issues for gender equality. Neither domestic violence nor abortion implicates redistributive measures, and neither is likely to provoke strong opposition along economic lines. However, abortion reform faces strong opposition from the Catholic Church. Policies to address the rights of domestic workers also do not challenge church teaching, but attempts to equalize the rights of these workers will confront entrenched class-based opposition, given the strong redistributive character of such reforms. These different political dynamics condition the impact of the major explanatory variables outlined earlier, including the larger context in which debates about reform take place, the willingness of the state to address the issue, and the ease of building political alliances in support. As a result, each issue has had a different political trajectory. There has been notable success regionwide in reforming laws on domestic violence. By contrast, the expansion of rights for domestic workers and the decriminalization of abortion have proven much more difficult to achieve. Domestic Violence

Of the many problems that affect gender equality in Latin America, domestic violence is in several ways the policy issue most conducive to reform. Although domestic violence remains endemic and widespread throughout the region, the past two decades have witnessed an increase in public awareness of domestic violence as a serious social problem and the creation of broad alliances in favor of policy reform. Domestic violence affects all social classes; thus the potential constituencies who stand to benefit from policy reform are much broader than is the case with many gender issues. The fact that historically, domestic violence has been both socially condoned and viewed as a private family matter helps explain why reform efforts in the region are relatively recent. But as a result of the successful politicization of the issue by women’s movements throughout the region and the broad international push for stronger sanctions against domestic violence, it has become difficult for

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potential opposition to articulate a politically acceptable justification for blocking reform. Sanctioning domestic violence is a regulatory issue (although implementation has budgetary implications), and it does not challenge traditional gender roles or church doctrine. Indeed, in the past two decades every country in the region has reformed its policies and criminalized domestic violence. Despite these successes, both the content of domestic violence policy and its implementation reflect a class bias that disproportionately excludes poor women from the benefits of policy reform. Hence, although domestic violence policies have certainly overall improved conditions for women as a group, policy implementation has also often maintained or even aggravated extant inequalities between rich and poor women. The Social Conditions of Domestic Violence

Domestic violence is widespread in Latin America and cuts across social classes. However, the often-invisible nature of the problem, continuing cultural defenses of domestic violence, and debates about the very definition of abuse all make it difficult to quantify the extent of the problem with any precision. Estimates of the prevalence of domestic violence range from a low of 10 (from a 1994 survey of San José, Costa Rica) to a high of more than 60 of women (from surveys of Quito, Ecuador [1992], and Chile [1993]; see Creel 2001). Many analyses place the percentage of Latin American women who have experienced physical domestic violence at more than 30 and as high as 80 if psychological abuse is included (see, for example, Thomas 1992; Morrison and Biehl 1999; Valente 2009). Where machismo has historically been a significant cultural factor, domestic violence was long perceived to be a private and even natural dynamic within the home. The cultural defense of violence against women and its endemic nature, combined with the lack of concrete ser vices for victims of abuse, made women unlikely to report abuse. Although the practice crosses class lines, the isolation of abuse victims is particularly acute for poor, rural, and/or indigenous women, who have the least access to educational information and to concrete support ser vices that could help them escape an abusive home. The challenge for advocates of policy reform has therefore been, first and foremost, to reframe the issue of domestic violence as a public problem that requires legal sanctions. The second major challenge has been to adequately implement whatever policy reforms are passed. The Politics of Domestic Violence

A number of factors coalesced in the early 1990s to create an auspicious political context for reform of domestic violence laws. Throughout the Southern Cone countries (Argentina, Chile, and Uruguay) in particular, feminist organizations

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“deprivatized” domestic violence and successfully framed the issue as inseparable from the macro political violence that had plagued the region under military rule (Valdés and Frohmann 1993; Chinchilla and Haas 2006; Waylen 1998). Recent work by international organizations and Latin American NGOs has linked domestic violence to larger social problems like poverty, drug use, and crime and has emphasized the high social and economic costs of domestic violence for Latin American nations (Morrison and Biehl 1999; Creel 2001; Morrison, Ellsberg, and Bott 2004). For example, one calculation places the economic costs of violence against women between 1.3 and 5 of the region’s GDP. This includes costs associated with victim protection, prosecution of offenders, and lost productivity due to domestic violence (Morrison and Biehl 1999). Such attempts to capture the social costs of domestic violence reflect the fact that in recent decades, government and societal views of domestic violence have evolved, and the issue is increasingly seen as part of a pattern of social oppression and not “merely” as an issue affecting women. At the same time, the issue of violence against women gained traction as a political issue at the global level, and a series of UN and regional agreements served to pressure Latin American countries to reform their laws. By the end of the 1990s, every Latin American country had enacted policy reforms to address and sanction domestic violence. In recent years, a number of Latin American countries, such as Chile and Costa Rica, have defined domestic violence as a public health issue, thereby expanding the issue’s political visibility while simultaneously taking the issue beyond narrow and conflictive debates about women’s rights. Both feminist activism and the efforts of WPMs have played a critical role in putting domestic violence on the political agenda. In the early years following the transitions to democracy, WPMs in many Latin American nations were eager to pursue policy reforms on women’s equality but were limited by the conservative political context of posttransition politics. For example, Chile’s SERNAM and the national women’s councils in Argentina and Brazil focused on domestic violence as a critical public policy issue that was unlikely to antagonize political conservatives, economic elites, or the Catholic Church. Alliances between these executive agencies and feminist organizations outside the state strengthened reform efforts. In a comparative analysis of domestic violence policy in Argentina and Chile, Franceschet (2010) concludes that beyond broad political will or the existence of organizations in favor of reform, successful reform of domestic violence laws depends on a WPM that has political influence within the executive (including a substantial budget, technically expert staff, and the power to introduce legislation) to create powerful policy alliances with reform-minded groups outside the state. In Chile, SERNAM’s legislative authority and budgetary strength allowed the agency to facilitate the participation of feminist organizations in

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the policy-making process, and the result was more successful reform than in Argentina, where a politically and financially weak agency struggled within a decentralized and politically unstable state (Franceschet 2010). The creation of these policy networks is not limited to posttransition democracies. Costa Rica has developed one of the most comprehensive government programs to address domestic violence in the region. The National Plan to Treat and Prevent Intra-family Violence, coordinated by the National Women’s Institute (INAMU), integrates domestic violence ser vices across regions and levels of government, including a network of shelters, hotlines, sensitivity training for judicial personnel and social workers, and public awareness campaigns (Creel 2001). These efforts have demonstrated the importance of middle-class support for successful policy reform. Because middle- and upper-class women are also victims of domestic violence, these groups are strongly committed to policy reform. The presence of middle-class activists changes the policy-making dynamic in a number of critical ways. Throughout the region, middle-classbased NGOs have worked with popular “base organizations” to create broad alliances for reform. Professional NGOs, staffed by university-educated women, also bring technical expertise to the reform efforts that in some cases allows these organizations significant influence on the shape of legislation. Furthermore, the middle class is critical to efforts to change social attitudes about domestic violence because its members have the resources and access to create education campaigns that raise awareness of the issue. Feminists in Latin America have successfully brought the issue of domestic violence (and violence against women more broadly) into high-school and university curricula, and they have in many instances learned to use mass media to reach a broad segment of the population (Ríos Tobar 2003; CLADEM 2005; Franceschet 2010; Haas 2010). The parties of the Left have been the most vocal supporters of domestic violence policy reform. The largely successful reframing of domestic violence as an issue of public concern has made it difficult for politicians to vote against reform once a policy proposal has been introduced into the legislature. Domestic violence is not a redistributive issue by definition, and it does not conflict with church doctrine. A proposal to sanction domestic violence can be framed quite easily as both a moral and practical imperative, and it is extremely difficult for any opposition to reform to mount a publicly defensible argument against it. Political opposition thus takes a more indirect form that is reflected in the problems most countries in the region have had in fully implementing policy reforms. From a redistributive standpoint, the implementation of domestic violence policy requires government financing in a wide variety of areas, from the criminal proceedings involved in prosecuting an aggressor to the building of shelters for victims of domestic violence and the training of

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the medical and judicial personnel who encounter victims of abuse. In a region perpetually beset by economic crises, the opposition to reform can use economic arguments to limit the funding of these programs and thus to hamper the implementation of the laws. In a similar vein, conservative politicians, as well as Catholic leaders, often accuse domestic violence laws of breaking up the family by prioritizing prosecution and punishment of the aggressor over reconciliation and family unity. When such opposition influences the final shape of domestic violence legislation, it can undermine the effectiveness of domestic violence policy in concrete ways, for example, by leaving the decision to remove an aggressor from the home to the discretion of individual judges (see Franceschet 2010; Haas 2010). We clearly see the effects of this opposition in the common problems that have emerged in the wake of regionwide efforts at reform. Without exception, implementation of domestic violence laws is hampered by insufficient budgets and by inadequate training of the police, medical professionals, and judges who play a role in the investigation and prosecution of domestic violence cases. These efforts are further complicated by the fact that most domestic violence legislation prioritizes the maintenance of family unity over victim protection through such mechanisms as mandatory efforts at reconciliation, often while the abuser remains in the home, and community service over incarceration (Alvarez 1990; Franceschet 2010; Haas 2010). Viewing domestic violence as a family problem rather than a criminal matter also leads many countries to process complaints through civil rather than criminal courts, which usually results in more lenient punishments. (Costa Rica is a notable exception in this regard. Under the 1996 Law Against Domestic Violence, an abuser can be barred from the home and from access to the victim without criminal or civil proceedings. See Creel 2001.) Beyond these common problems, other analyses of the shortcomings of domestic violence reform illustrate the class bias that exists in the content and especially the implementation of domestic violence laws. A regionwide analysis by the Latin American and Caribbean Committee for the Defense of Women’s Rights (CLADEM) notes that domestic violence laws conceive of the problem and its solution from an urban perspective, which disadvantages poor women in a number of ways. Rural women, who are disproportionately poorer and less educated on average than urban women and are more likely to be members of an ethnic minority, have much less access to both the educational programs that help women recognize and seek help for domestic violence and the government ser vices that assist victims of domestic violence. As noted earlier, feminists have been successful in many countries in establishing domestic violence awareness programs in high schools and universities, but poor urban and rural women have little access to these institutions. Furthermore, where traditional machista culture is more entrenched, domestic

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violence is harder to combat. This is often the case in rural areas and where indigenous communities and other ethnic minority groups are economically and socially excluded from mainstream society (CLADEM 2005). Not surprisingly, funding for shelters, legal assistance, and the training of policy and medical personnel is lower in rural areas. The insufficient implementation of domestic violence policies and the inability of many poor women to access anti-domestic-violence ser vices means that even though government policies in this area have improved, they have disproportionately benefited educated, middle- and upper-class women. As a result, advances in domestic violence policies have nevertheless largely maintained existing class inequalities among women. Domestic Workers

Responsibility for family care continues to fall almost exclusively on women, even when they participate in the workforce, producing what many scholars refer to as the “double burden” for women. A large survey by the United Nations Development Programme on time use in fourteen Latin American countries revealed a huge gender gap in time spent by women versus men on household and care work (UNDP/ILO 2009). In addition, this burden differs by class as well as by sex. Although both low- and high-income women work outside the home, their options for resolving this double burden are dramatically different. Middle- and upper-class families resolve it through access to cheap domestic labor. Low-income women and girls take up these jobs as nannies and maids in wealthier households (Bunster and Chaney 1985; Chaney and Garcia Castro 1989; Gill 1994; Maher and Staab 2006). The Social and Legal Conditions of Domestic Workers

The realm of paid domestic work constitutes what is traditionally considered “women’s work.” A domestic worker is a person who works at an employer’s private residence to provide cooking, cleaning, child care, or other prescribed services. Sometimes the domestic worker also lives in the employer’s residence. Paid domestic work today employs more than twelve million women and girls in Latin America, constituting more than 15 of the economically active female population in the region and hence providing the largest single source of employment for women (Organización Internacional de Trabajo 2009). More than 90 of all domestic workers are women, and many or most are from ethnic and racial minorities. This dynamic is entrenched in gender, class, and ethnic inequalities. Since 2003, Bolivia, Uruguay, and Costa Rica have equalized the rights of domestic workers with those of other workers through Congress, and Colombia

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did so through its Constitutional Court in 1998. However, explicitly discriminatory legal statutes still remain in place in the other fourteen Latin American countries. In most national labor codes, domestic workers are not granted the same rights as other workers, such as salary, benefits, and limits on work days and weeks. Brazil and Mexico only guarantee nightly rest for domestic workers, in effect allowing for up to sixteen-hour workdays; the Dominican Republic allows fi fteen-hour workdays; Venezuela, Guatemala, and Honduras allow fourteen-hour workdays; and most of the rest maintain twelve-hour workdays. In many countries, domestic workers also do not have full weekends off and are legally granted less vacation time. They thus have less private and leisure time than other members of society and can find it exceedingly difficult to care properly for their own children or elderly dependents. In Chile until 1998, and in Argentina to date, domestic workers are explicitly excluded from maternity leave, a particularly powerful form of discrimination because paid domestic work is the occupation with the highest proportion of women. In addition, in the countries where the minimum wage of domestic workers is specified, it tends to be set lower than the national minimum wage (down to 40 in Paraguay), and in many cases domestic workers do not have equal rights to unemployment insurance or severance pay. Finally, in many countries, including Venezuela, Argentina, Paraguay, Honduras, and Guatemala, labor codes mandate respect of employee toward employer but not vice versa. Moreover, enforcement of the rights that do exist is inadequate, and most domestic workers labor informally, without written contracts or social security (Human Rights Watch 2002, 2004). A set of surveys conducted in 1995 (funded by the International Labour Organization and carried out by domestic worker organizations) found that in Peru, 41 of live-in domestics worked more than eighty hours a week (CONLACTRAHO 2004, 20). In Mexico, only 5 received the mandated vacation time established in the Labor Code. In Brazil, 27 did not get the eight hours of rest a night stipulated by the law, and in Bolivia, the majority of domestic workers worked more than eighty hours a week, and very few got the vacation days to which they were entitled (ibid., 12–18). More recent surveys find similar gaps in enforcement (Blofield forthcoming, chapter 3). In addition, although pension coverage overall varies dramatically among countries, in all countries coverage for domestic workers remains lower than for the rest of the economical ly active population (OIT 2009; for many countries, the data do not separate pension and health-care coverage, so it is difficult to cite a regional average). Hence we can identify double discrimination against domestic workers: first, explicit legal discrimination, and second, weak enforcement of the rights that do exist. Overall, it is fair to say that paid domestic work as an occupation in Latin America today, on average, does not meet the minimal standards of what can be considered decent work as defined by the International Labour Organiza-

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tion. The legal and policy status quo in these countries, in effect, maintains or exacerbates the inequalities between wealthy and poor women. The Politics of Equal Rights

What is striking is that two decades after democratic transitions, the vast majority of countries in Latin America continue to discriminate legally against this particularly vulnerable group of workers. The arguments in favor of equal rights for domestic workers are powerful and are bolstered by a favorable international context of treaties and conventions. They can draw on United Nations conventions such as CEDAW and numerous International Labour Organization conventions that prohibit labor discrimination and that virtually all countries in the region have ratified. Reformists can also often appeal to national constitutions that enshrine equal rights and prohibit genderbased discrimination. In addition, arguments in favor focus on the inherent importance of legal equality in a democracy. They also argue that labor laws should focus on equal rights in principle and on protecting the weaker, more vulnerable party in a labor relation, not discriminate against him or her (Blofield forthcoming). However, if convincing arguments and ratified international treaties were all it took, discriminatory laws would have been reformed soon after democratization, at the first mention of these contradictions. Instead, it has been easier to maintain the status quo than to change it, and it is clear that seemingly straightforward demands for equal rights confront entrenched opposition, even if it is not organized. The main culprit has been class-based elite resistance. Legally and economically, the interests of domestic workers are opposed to the interests of their employers, who belong to the middle and upper classes. When domestic workers’ organizations have demanded social attention and equal labor rights, political actors in the region have been extremely reluctant to respond to these demands, given that such changes go against the interests of their better-organized middle- and upper-class constituents. The opposition to date has managed, implicitly but powerfully, to maintain most of the explicit legal discrimination against this group of workers in the legal codes. Where reform has come about, it has been slow and obstacle ridden. Regionally, the variation in legal reforms cannot be explained by WPM strength or higher percentages of female legislators. Uruguay, with low female representation in Congress, equalized domestic workers’ rights in 2006. Although Costa Rica, with 37 female legislators, did equalize domestic workers’ rights in 2009, Argentina, with 40, has retained highly discriminatory laws to date. In addition, some of the most vocal opposition in Costa Rica came from female legislators. Chile, with one of the strongest WPMs, retains unequal work hours.

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Elite resistance to reform, whether active opposition or indifference, can explain much of the overall lack of reform in the region to date. However, legal reform has been possible even in a region as unequal as Latin America. It has involved mobilization by domestic worker organizations, a network of social and political allies, and political “windows of opportunity,” mostly linked to left-wing executive and legislative allies that have allowed reform bills to emerge onto the political agenda (Kingdon 1995; McAdam, McCarthy, and Zald 1996; McAdam, Tarrow, and Tilly 2001). There is no single path to reform; smaller, piecemeal reforms require less mobilization and pressure than equal rights reform that includes working hours. The key struggle has been to make the issue visible and to get it on the political agenda; once the issue gets to a plenary debate and goes up for a vote, it is very likely to be approved. With executive support, which to date has rarely been forthcoming, agenda setting and reform can be speedier and less obstacle ridden (Blofield forthcoming). Given the constraints on their time and their lower skills, weaker networks, and meager resources, domestic workers’ organizations face an uphill battle in getting their voices heard. Hence allies are necessary. Potential social allies for domestic workers’ organizations are labor, feminist, human rights, and indigenous/ethnic-based organizations. These potential allies, however, are certainly not automatic ones. Given the marginalized status of domestic workers in three dimensions (class, gender, and ethnicity/citizenship), organizations dedicated to the rights of labor, of women, or of indigenous people broadly are unlikely, as a point of departure, to prioritize this group (Strolovitch 2006). To get the attention of these allies, and consequently to pressure politicians, domestic workers must first organize autonomously and publicize their cause. The issue is particularly complicated when it comes to gender. Although indigenous people and workers as groups tend to be economical ly disadvantaged, women, as discussed earlier, cut across class lines. The majority of middle- and upper-class women in Latin America employ domestic workers in their households, and their preferences will be very different from those of their employees. Opposition to legal reforms has also come from women, specifically right-wing, female politicians and conservative women’s groups such as housewives’ organizations (Blofield forthcoming). Even for feminists, the issue of domestic workers’ working conditions and rights has in general not been a priority (Chaney and Garcia Castro 1989). Given the entrenched traditional division of household labor in the region, the ostensible liberation of most middle-class women is based on the availability of cheap domestic workers, and many feminists rely on domestic workers as well (for Brazil, see Alvarez 1990, 53–54). Although they are unlikely to oppose extending rights publicly, their middle-class status does affect their priorities. In Chile and Argentina, for instance, feminists have remained strikingly silent on domestic workers’ rights. On the other hand, in Bolivia and in Costa Rica,

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several feminist organizations did become vocal supporters of reform during the arduously long process of converting a bill on domestic workers’ rights into law. In Bolivia, domestic workers’ organizations were able to frame the issue as one of indigenous rights, which gave them more political allies, and in Uruguay, the cause was taken up by the country’s central labor union (Blofield forthcoming). The strategy of the opposition has been, in most countries very effectively, not to directly confront arguments based on equal rights but to keep the issue of domestic workers’ rights off the political agenda. Opponents have drawn on more informal, less visible veto points such as postponing and tabling bills in commission. This has been aided by a general indifference toward the issue among the bulk of politicians (Blofield forthcoming). When opponents are forced to make an argument (in congressional debates, for example, which provide a public window on elite resistance once the issue is on the agenda), the framing tends to focus more on practical effects and is in some ways similar to broader neoliberal economic arguments about the effects of increased labor rights on labor-market conditions. The argument is that increased rights will produce unintended negative consequences for the intended beneficiaries of the bill by placing an unacceptable burden on the middle classes and hence making them reluctant to hire domestic workers. However, the arguments are unique in their explicitly patronizing tone, underappreciation of the work done by domestic workers, and the personal experiences legislators often draw on during debates (reinforcing Mansbridge’s [2005] point on personal experiences rather than biological differences influencing policy positions). In Bolivia, a male senator argued that domestic workers, unlike other workers, such as miners, who really needed to rest, were not in need of legislated vacation time. In Costa Rica, a key female legislator argued that it was acceptable to retain a longer workday for domestic workers because they watched soap operas during the workday, and in Chile, during the debate on maternity leave, several male senators expressed discomfort at the idea of having a pregnant houseworker inside their home (Biblioteca del Congreso Nacional 1998, 153). Across countries, legislators have brought up the “special,” “delicate” relationship between employer and employee that may be disrupted by increased legal rights, revealing a sense of threat they perceive in equalizing the rights of this social group, culturally as well as economically. This view has deep historical roots in the region, where the relationship between servants and masters has long been seen by elites as private and paternal (Blum 2004; Gill 1994; Graham 1992; Kuznesof 1989; Rubbo and Taussig 1983). Even when legislators appeal to these arguments in private and in congressional debates, they are still hesitant to actually cast a vote against such a bill, given the endorsement of explicit discrimination that such a vote implies. The challenge for reformists has been to break the invisibility and silence. The

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more visible the issue is in public discourse and the communications media, the more embarrassing it becomes to maintain oppositional arguments. Once the silence is broken, the arguments in favor of equal rights tend to carry the day. Indeed, the problem for opponents, once the issue is visible, is that no broadly accepted morally legitimating discourse that denies equal rights to domestic workers exists today. This feature distinguishes this issue from reproductive health and abortion, discussed next, where opponents of liberalizing reform are backed by the Catholic Church and other religious organizations and can claim a moral high ground with more confidence. In addition, given Latin America’s class structure, more constituents are likely to come from the classes that provide domestic workers than from the classes that employ them. The current international context may help with the visibility challenge. In June 2010, the International Labour Orga nization debated a potential convention on domestic workers’ rights at its annual meeting in Geneva, Switzerland. The increased attention surrounding this process has provided visibility for the cause and bolstered the efforts of domestic worker organizations to reform laws. As a result, the international context may bolster future legal reform attempts, as it has done with domestic violence. However, this issue, like domestic violence, is likely to continue to face the challenge of adequate enforcement. Abortion

Abortion, unlike criminalization of domestic violence or reform of laws on domestic workers, has strong religion-based opposition. The Catholic Church consistently opposes any form of legal abortion with the position that human life begins at conception, and abortion is therefore homicide. On the other hand, feminists have demanded access to legal and safe abortion as an integral dimension of women’s rights, arguing that it is precisely “their special responsibility for human reproduction” that makes women’s options “more restricted than those of men” (Borchorst 1994, 32). In addition, many point to the public health consequences of keeping abortion illegal despite the social reality of its widespread practice in the region. Latin American countries retain highly restrictive abortion laws with the exception of Cuba and more recently Mexico City, where abortion was legalized in 2007. In Uruguay, Congress voted to decriminalize abortion, but the president vetoed the bill in 2006; it remains on the political agenda. On the other hand, in some countries, both laws and political debate have been moving in a more conservative direction; in Chile, the outgoing military regime prohibited therapeutic abortion to save the life of the woman in 1989, and in the past decade, under democratic governments, El Salvador, Nicaragua, the

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Dominican Republic, and several Mexican states have also outlawed therapeutic abortion. The Social Conditions of Abortion

The problem of abortion in the region needs to be analyzed in the context of lack of access to decent reproductive health ser vices that would allow women and couples to control their fertility safely and to decide whether and when to have children. The regional fertility rate is 2.9 children per woman. The problem is that much fertility regulation takes place through pregnancy termination rather than prevention. Despite the legal restrictions, it has been estimated that 28 of pregnancies in the region end in induced abortion. In absolute numbers, an estimated four million abortions are performed clandestinely every year, and as a result, abortion-related deaths and hospitalizations are high (Alan Guttmacher Institute 2007). These data reflect the tremendous unmet needs for contraception in the region and the use of abortion as a method of birth control. If the goal of abortion laws is to restrict the number of actual abortions, they are ineffective: fewer than 1 of actual abortions in the region are performed legally. If we take a more comprehensive view of reproductive health policies that examines not only abortion laws but also interpretation, access, and policy outcomes, as well as preventive policies, we can see the differential class impact of restrictive policies in practice. In effect, the current status quo on policy outcomes exacerbates the inequalities between wealthy and poor women. Although contraception is no longer prohibited (as it was under some authoritarian regimes), the Catholic Church and conservative politicians have continued to make sex education and contraceptive access through the public sector difficult. This especially hurts low-income girls and women who rely on the public sector and as a result lack both the information and the resources to prevent unwanted pregnancies. Studies indicate that contraceptive use tends to be lowest among poor women and girls (Checa and Rosenberg 1996; Foro Abierto de Salud y Derechos Reproductivos 1998; Ramos and Viladrich 1993). In addition, the adverse physical effects of abortion and reproductive health policies are largely contained among lower-class women. Middle-class women simply require an afternoon off at a private doctor’s clinic to obtain a safe illegal abortion performed by a qualified practitioner at a high price, and men can, if they choose, remain completely uninvolved. Meanwhile, lowincome women resort to clandestine abortions that are often performed by untrained practitioners and can lead to infections and hemorrhaging, forcing hundreds of thousands of women in the region annually to seek medical attention in hospitals (Blofield 2008). These women are often mistreated by

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hospital staff and suffer from lack of adequate attention or access to anesthetics, and sometimes extortion by police officers (Ramos and Viladrich 1993). In Chile, hospitalized women are more commonly prosecuted for abortion than in other Latin American countries (Casas 1996). Some of these botched abortions end up being fatal to the women, producing unnecessarily high maternal mortality rates in the region. These effects not only are detrimental to women’s life and health, both physical and psychological, but also cost the state scarce public health resources. One study on Chile claimed that the state spent around US$15 million in 1995 to treat women with postabortion complications (Casas, Núñez, and Zavala 1998). More broadly, effectively regulated fertility can increase the well-being especially of lower-income women and families by enabling them to invest family resources better and hence also can reduce potential state outlays in the future. Therefore, more effective preventive policies could potentially decrease extant inequalities between wealthy and poor women. The Politics of Abortion

The most significant obstacle to reform on both termination and prevention of pregnancies is the Catholic Church. However, even though opposition to legalization is moral in character, deep class divides and inequalities also influence the opportunities and constraints for reform. Abortion and reproductive policies more broadly must be understood in relation to how economic inequalities mediate the strategies and the relative impact of the Catholic Church and conservatives, on the one hand, and feminists and reformists, on the other hand. The higher the share of income in the hands of the elites, the harder it is to mount an effective reformist challenge to resolve urgent social problems, even in a policy area where we would not intuitively expect economic inequalities to have much, if any, effect (Blofield 2006). Again, the percentage of female legislators or a strong women’s policy machinery does not, at least directly, lead to more reformist politics on abortion. Indeed, Uruguay, the one country where abortion is closest to legal reform, has a very low percentage of women in Congress. Chile, with a strong WPM, has one of the most restrictive laws on abortion. On the other hand, left-wing parties and governments appear to be more open to reform and may be a necessary, but certainly not sufficient, cause for reform. Indeed, abortion in Mexico City was legalized under the left-wing Partido Revolucionaria Democrática government in 2007, and it was the left-wing Congress in Uruguay that approved decriminalization of abortion. As discussed in the other chapters in this book, economic inequality allows elites disproportionate influence over media ownership (framing) and campaign financing (framing and agenda setting) and, consequently, over

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the political dynamics all the way from how a problem is defined to whether and what legislation is passed. If and when this inequality is combined with close relations with the Catholic Church and conservative Catholic organizations (such as Opus Dei and the Legionaries of Christ, both of which are influential in Latin America) and political elites, both framing and agenda setting on reproductive health and abortion are likely to be heavily influenced by the ideology of these groups. This has been most clearly the case in Chile, where the moral agenda of the political Right has reflected the doctrine of these conservative Catholic organizations on family and sexual morality, and media owners have ensured that this view has dominated in Chilean media as well. Indeed, the only bill on abortion to make it to congressional debate in the democratic era sought to increase jail terms for those involved in abortion procedures, and it lost in the Senate in 1998 by only one vote (see Blofield 2006, 135–36). These resource imbalances have been reinforced by the international context. As discussed earlier, the church and conservatives have a strong, organized, and well-financed international actor—the Vatican—to draw on for support, while the international networks of feminists are significantly weaker and command less attention. The dynamics of this international context took on almost comic proportions during Carlos Menem’s presidency in Argentina (1989–99) when he aggressively courted the pope with his antiabortion campaigns internationally and domestically in order to buy the silence of the domestic Catholic Church regarding government corruption and neoliberal policies and personally visited the pope seven times during his ten years in office (Blofield 2006, 133–36). This imbalance in resources and influence is exacerbated by the detrimental effect class divisions have on middle-class solidarity, which is essential for abortion reform in Catholic countries (see Blofield 2006). In many Protestant countries, doctors’ associations were vital players in the initial liberalization of abortion laws (1960s to the 1980s) (Brodie, Gavigan, and Jenson 1992; Luker 1984; Stetson 2001), and reform came more easily and with less opposition. In Catholic countries, on the other hand, feminists have been central to the initial push for legal reform on abortion, and doctors’ associations have tended to oppose reform (and did so, for example, in Italy, Spain, and Portugal during the first reform in 1984). This opposition has forced feminist movements to organize around the issue, often alone, in order to change framing and to place abortion on the political agenda. Feminists have had to redefine abortion as a public health issue and/ or a women’s rights issue to politicize it (Lovenduski and Outshoorn 1986, 4). In Catholic countries, then, strong feminist mobilization has been necessary for liberal abortion reform. However, such mobilization is necessarily based on cross-class solidarity. Given that the practical effects of restrictive abortion policies fall largely on poor women, while women with resources can buy safe clandestine abortions, middle-class women—and men—must be willing to

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identify with the needs of lower-class women and act on them. Hence the Catholic countries where reform has occurred—for example, Italy, Spain, France, and Portugal—also have lower inequalities and class divisions, and feminists have been able to tap into middle-class solidarity and, on the basis of this cross-class solidarity, have publicly and collectively pushed for abortion reform (see Blofield 2006, 2008). Such cross-class solidarity has been much harder to foster in Latin America, and the difficulties in mobilizing a critical mass of activists have been exacerbated because of the opposition of such a powerful and orga nized institution as the Catholic Church (see Blofield 2006). Indeed, feminists have struggled with low social support on this issue despite the fact that abortion as a practice is ubiquitous in the region. This lack of social pressure is reflected in the priorities of political actors, including the ostensibly more sympathetic left-wing parties. A quote by a Socialist senator in Chile is illustrative: “Look out the window, I don’t see any feminist movement here, anything like what I saw in Italy in the 1970s.” The same senator also dismisses the immediate problems caused by lack of legal abortion, arguing that the problem of abortion is already solved in Chile because “everyone knows a doctor.” This comment reveals the deep class divisions in Chilean society and the senator’s lack of connection to his social bases, where women tend to rely on unqualified practitioners, not doctors. Another example is Nicaragua, where the avowedly left-wing president Daniel Ortega openly courted the Catholic Church during his presidential campaign in 2005 by voting in favor of the ban on therapeutic abortion while he was in Congress, despite intense pleas by feminists not to do so. This total ban on abortion, including cases when a woman’s life is under threat and the fetus is unviable, has been in effect since July 2008 and led to the avoidable deaths of at least tens of women during its first year (Amnesty International 2009). Despite this, President Ortega has to date steadfastly refused to consider revisions to the ban. These dynamics reveal the difficulties in mobilizing on behalf of and gaining political attention to the needs of poor women. Consequently, in the face of weak mobilization, even political parties on the left are likely to be unresponsive, given the superior resources and competing pressures of the Catholic Church and conservative parties.

Conclusions The case studies of gender equality policies presented in this chapter show that to gain a comprehensive understanding of the policy process on gender equality, one must integrate class into the analysis. This is not to say that

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inequalities and class are determinative factors in the policy process; rather, they interact with other variables to influence the outcomes. Therefore, we can neither ignore nor reify the influence of inequalities and class; we need to trace the process of both in each case. Given that women cut across class lines, gender equality is a particularly illuminating policy area through which to examine the independent and interactive effects of gender and class. We have shown that in the absence of strong efforts to the contrary, agenda setting on women’s rights is likely to maintain class inequalities among women because implicit and explicit class divisions prioritize the interests of middle- and upper-class women, and issues that disproportionately affect poor women remain unaddressed. In some cases, class divisions are explicit, for example, the threat that middle classes perceive when equal rights for domestic workers are on the agenda. While the costs are contained among lower-income women, the middle and upper classes directly benefit from the status quo. They therefore have an interest in maintaining it and are likely to actively resist reform. In other cases, class divisions are implicit but nonetheless present, even in policy areas where we would not intuitively expect them to have much, if any, effect. For example, issues that middle-class women prioritize, such as political representation and domestic violence, are more likely to be addressed than are issues where the effects of discrimination are contained among lower-class women. If the latter is the case, not only are extant inequalities often exacerbated, but also containment, ironically, can make it harder to overcome them. Class divisions make it harder to mobilize social support for policy reform and impede the successful politicization of the issue. This is what we see in the case of reproductive health and abortion, where conservative actors are able to dominate the framing of abortion as a moral and a criminal rather than a social problem, and middle-class women are able to resolve their need for the procedure privately through illegal and expensive means. Effects such as hospitalizations from illegal abortions and lack of access to means to prevent pregnancy through the public sector are contained among poor women, whose needs are not politicized. Finally, in the case of domestic violence, the costs of the status quo were not contained among lower-income women but were suffered by women from all income groups. Criminalization per se also did not require redistribution of resources among classes. Hence mobilization in favor of reform was broader and more successful. However, implementation has reinforced class lines and maintained inequalities, and in addition to being chronically underfunded, proactive policies to combat domestic violence reach the middle classes and elites more than they do lower-income women. These findings reinforce the interactive effects of class and gender; neither can be fully understood in isolation. They show how difficult it is to get political

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attention on issues that disproportionately affect a doubly disadvantaged group: poor women. Persistent collective action and coalition building by civil society actors, often over many years and with left-wing support, have in a few cases resulted in policies that not only address gender equality but also seek to mitigate class inequalities. The challenge here is to gain attention not only to gender discrimination but also to redistributive issues, and here, the traditional allies of one group (left-wing parties) or the other (feminists) do not easily coalesce to fight for the overlapping constituents of both these allies.

Notes 1. The political power of the Catholic Church varies across Latin American countries, but throughout the region, it is a significant player in debates about gender and women’s rights. Its policy influence depends on several factors, including the church’s historical role, its connection to par ticu lar political parties, its control of media outlets and access to economic resources, and the level of religiosity of the population. For more on the Catholic Church’s role in debates about gender equality, see, for example, Kampwirth (1996) on Nicaragua; Haas (1999) on Chile; Guedes (2000) on Brazil; Htun (2003) on Argentina, Brazil, and Chile; and Blofield (2006) on Argentina and Chile. In addition to these case studies, Molyneux (2002) provides a regional perspective on the church’s role in gender policy debates. 2. See, for example, Banaszak 1996; Bystydzienski and Sekhon 1999; Caul 2001; Ferree and Martin 1995; Stetson and Mazur 1995, 2000; Turshen and Holcomb 1993; and Weldon 2002. 3. “Democracy in the country and in the home” became a rallying cry of the Chilean women’s movement (see Valdés and Frohmann 1993). 4. See, for example, Alvarez (1990) on Brazil and Richards (2004) and Waylen (1998) on Chile. 5. Alvarez 1990; Waylen 1998; Franceschet 2005. 6. The possibility of disbandment is a focus of Valiente’s (1995, 1997) research on the Women’s Institute in Spain. 7. For example, Alvarez 1990; Baldez 2001; Blofield and Haas 2005; Chinchilla and Haas 2006; Franceschet 2005; Friedman 2000; Jaquette 1994; Randall and Waylen 1998; Richards 2004. 8. Bolivia’s ministry was disbanded after the election of Evo Morales in 2005. 9. A bill currently pending in the Costa Rican parliament would transform the National Center into the National Women’s Institute, an independent government ministry. 10. Of course, most assessments of programs such as bolsa familia are not negative and recognize their concrete effect on extreme poverty. Hunter and Power (2007), for example, note that this aid increased the spending power of poor families in Brazil. 11. Beckwith 1992; Ellickson and Whistler 2000; Elman 1996; Lovenduski and Norris 1993. 12. See Weldon (2002) for a broad review of this literature. 13. Eleven Latin American countries have instituted quota laws. Across the globe, fi ft y nations have done so (see IDEA International Quota Database, www.quotaproject.org). 14. Common obstacles to effective gender-quota laws include debates about the minimum percentage of women who must be nominated as candidates and the placement of women on party lists. 15. Furthermore, few political parties in Latin America have well-instituted training programs for new legislators, and thus the effectiveness of those poor and working-class women who do manage to win office is limited. 16. Peru reformed its law in 2003 but did not fully equalize the rights of domestic workers, and the Argentine government introduced a bill to equalize rights in March 2010. The Chamber approved the bill in March 2011, when this book was in press. For a full discussion of laws in the region, see Blofield 2009, forthcoming. 17. The current legal reform project under consideration in the Argentine Congress would eliminate this discrimination.

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18. Thanks to Jennifer Pribble for this observation. 19. Bolivian Senate, extraordinary legislative session 56, April 2, 2003, p. 25. 20. Comisión Permanente de Asuntos Sociales, December 7, 1999, Session 80:10. 21. Interview with a Partido Socialista senator, November 13, 2000, Santiago, quoted in Blofield (2006), 119. 22. Ibid.

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Fraser, Nancy. 1997. Justice Interruptus: Critical Reflections on the “Post-socialist” Condition. New York: Routledge. Friedman, Elisabeth J. 2000. “State-Based Advocacy for Gender Equality in the Developing World: Assessing the Venezuelan National Women’s Agency.” Women and Politics 21 (2): 47–80. Gill, Lesley. 1994. Precarious Dependencies: Gender, Class, and Domestic Ser vice in Bolivia. New York: Columbia University Press. González, Victoria, and Karen Kampwirth, eds. 2001. Radical Women in Latin America: Left and Right. University Park: Pennsylvania State University Press. Graham, Sandra Lauderdale. 1992. House and Street: The Domestic World of Servants and Masters in Nineteenth-Century Rio de Janeiro. Austin: University of Texas Press. Guedes, Alessandrea Casanova. 2000. “Abortion in Brazil: Legislation, Reality, and Options.” Reproductive Health Matters 8 (16): 66–76. Haas, Liesl. 1999. “The Catholic Church in Latin America: New Political Alliances.” In Latin American Religion in Motion, edited by Christian Smith and Joshua Prokopy, 42–65. New York: Routledge. ———. 2001. “Changing the System from Within? Feminist Participation in the Workers’ Party in Brazil, 1989–1995.” In Radical Women in Latin America: Left and Right, edited by Victoria González and Karen Kampwirth, 249–72. University Park: Pennsylvania State University Press. ———. 2010. Feminist Policymaking in Chile. University Park: Pennsylvania State University Press. Hoskyns, Catherine. 1996. “The European Union and the Women Within: An Overview of Women’s Rights Policy.” In Sexual Politics and the European Union: The New Feminist Challenge, edited by R. Amy Elman, 13–22. Providence: Berghahn Books. Htun, Mala N. 2003. Sex and the State: Abortion, Divorce, and the Family Under Latin American Dictatorships and Democracies. Cambridge: Cambridge University Press. ———. 2004. “Is Gender like Ethnicity? The Political Representation of Identity Groups.” Perspectives on Politics 2 (3): 439–58. Htun, Mala N., and S. Laurel Weldon. 2010. “When Do Governments Promote Women’s Rights? A Framework for the Comparative Analysis of Sex Equality Policy.” Perspectives on Politics 8 (1): 207–16. Human Rights Watch. 2002. From the Household to the Factory: Sex Discrimination in the Guatemalan Labor Force. New York: Human Rights Watch. ———. 2004. No Rest: Abuses Against Child Domestic Workers in El Salvador. Report 16(1B). New York: Human Rights Watch. Hunter, Wendy, and Timothy J. Power. 2007. “Rewarding Lula: Executive Power, Social Policy, and the Brazilian Elections of 2006.” Latin American Politics and Society 49 (1): 1–30. Inter-Parliamentary Union. 2009. “Women in National Parliaments.” InterParliamentary Union website. http://www.ipu.org/wmn-e/classif.htm. Jaquette, Jane, ed. 1994. The Women’s Movement in Latin America: Participation and Democracy. 2nd ed. Boulder, Colo.: Westview Press. Kampwirth, Karen. 1996. “The Mother of the Nicaraguans: Doña Violeta and the UNO’s Gender Agenda.” Latin American Perspectives 23 (1): 67–86. Karl, Terry Lynn. 2000. “Economic Inequality and Democratic Instability.” Journal of Democracy 11 (1): 149–56. Keck, Margaret E., and Kathryn Sikkink. 1998. Activists Beyond Borders: Advocacy Networks in International Politics. Ithaca: Cornell University Press.

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Kingdon, John W. 1995. Agendas, Alternatives, and Public Policies. 2nd ed. New York: HarperCollins. Kuznesof, Elizabeth. 1989. “A History of Domestic Ser vice in Spanish America, 1492–1980.” In Muchachas No More: Household Workers in Latin America and the Caribbean, edited by Elsa Chaney and Mary García Castro, 17–36. Philadelphia: Temple University Press. Lovenduski, Joni, and Pippa Norris, eds. 1993. Gender and Party Politics. London: Sage Publications. Lovenduski, Joni, and Joyce Outshoorn. 1986. The New Politics of Abortion. London: Sage Publications. Luker, Kristin. 1984. Abortion and the Politics of Motherhood. Berkeley: University of California Press. Macaulay, Fiona. 2003. “Sexual Politics, Party Politics: The PT Government’s Policies on Gender Equity and Equality.” Working Paper CBS-46-03, Centre for Brazilian Studies, Oxford University. Maher, Kristen Hill, and Silke Staab. 2006. “The Dual Discourse About Peruvian Domestic Workers in Santiago de Chile: Class, Race, and a Nationalist Project.” Latin American Politics and Society 48 (1): 87–116. Mansbridge, Jane. 2005. “Quota Problems: Combating the Dangers of Essentialism.” Politics and Gender 1 (4): 622–38. McAdam, Doug, John D. McCarthy, and Mayer N. Zald, eds. 1996. Comparative Perspectives on Social Movements: Political Opportunities, Mobilizing Structures, and Cultural Framings. Cambridge: Cambridge University Press. McAdam, Doug, Sidney Tarrow, and Charles Tilly. 2001. Dynamics of Contention. Cambridge: Cambridge University Press. Molyneux, Maxine. 2002. “Gender and the Silences of Social Capital: Lessons from Latin America.” Development and Change 33 (2): 167–88. Morrison, Andrew R., and María Loreto Biehl, eds. 1999. Too Close to Home: Domestic Violence in the Americas. New York: Inter-American Development Bank Morrison, Andrew R., Mary Ellsberg, and Sarah Bott. 2004. “Addressing Gender-Based Violence in the Latin American and Caribbean Region: A Critical Review of Interventions.” World Bank Policy Research Working Paper 3438, World Bank, Washington, D.C. http://EconPapers.repec.org/RePEc:wbk:wbrwps:3438. O’Donnell, Guillermo. 1998. “Poverty and Inequality in Latin America: Some Reflections.” In Poverty and Inequality in Latin America: Issues and New Challenges, edited by Victor E. Tokman and Guillermo O’Donnell, 9–92 Notre Dame: University of Notre Dame Press. Oficina Internacional del Trabajo. 2005. Panorama laboral: América Latina y el Caribe. Lima: OIT. ———. 2009. Panorama laboral: América Latina y el Caribe. Lima: OIT. Ramos, Silvina, and Anahí Viladrich. 1993. Abortos hospitalizados: Entrada y salida de emergencia. Buenos Aires: CEDES. Randall, Vicky, and Georgina Waylen, eds. 1998. Gender, Politics, and the State. New York: Routledge. Richards, Patricia. 2004. Pobladoras, Indígenas, and the State: Conflicts over Women’s Rights in Chile. New Brunswick: Rutgers University Press. Ríos Tobar, Marcela. 2003. “Chilean Feminism(s) in the 1990s: Paradoxes of an Unfinished Transition.” International Feminist Journal of Politics 5 (2): 256–80. Rubbo, Anna, and Michael Taussig. 1983. “Up off Their Knees: Servanthood in Southwest Colombia.” Latin American Perspectives 10 (4): 5–23.

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10

Tax Reforms and Income Distribution in Latin America James E. Mahon Jr.

Introduction Fiscal policy should be part of the solution to the problem of inequality in Latin America, if only because, with the last wave of tax reforms, it might well have become part of the problem. This chapter examines relationships in both directions between the reforms of the past three decades and the region’s highly unequal income distribution. Did the reforms make inequality even worse? Given that the nature of the reforms might have been known to make this likely, why were such reforms chosen anyway? And in view of pressing distributional issues, what new tax reforms are desirable at this point? Briefly, I show that from a global perspective, recent tax reforms have accentuated a Latin American anomaly, its governments’ unusually great reliance on indirect (consumption) taxes and their trivial levels of personal income taxation. At the same time, income-distribution data show that Latin America, on average, grew somewhat more unequal from the late 1980s until the early years of the twenty-fi rst century. I then weigh some evidence for a relationship between these two trends from tax-incidence studies and the temporal patterns of tax reform and changes in inequality within and across countries. It appears that the tax reforms worsened inequality, but probably not very much. In answer to the question on the choice of reforms, I find no clear link between authoritarianism or inequality and the depth of tax reform. I point mainly to circumstantial factors—the pressing need for revenue, intellectual currents, and the role of the IMF—as well as to the unrealistic hope that spending could easily be reoriented toward effective redistribution. But I also argue that the region’s great inequality conditioned this choice in a Thanks to Richard Bird, Paula Consolini, Merike Blofield, Daniela Campello, and Fernando Filgueira for their helpful comments.

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fundamental way: when a country’s investment capital is held by very few, it is reasonable to fear capital flight in response to taxes on property or income. As for current and future reforms, I argue that getting more revenue is still just as important, and maybe more feasible, than strengthening income taxation, depending on the administrative capacities of each country. I conclude with comments on fiscal covenants and political incorporation, suggesting that along with the informal sector, in many Latin American countries it is the bourgeoisie that needs to be reincorporated into a national project. For data, I use the UNU-WIDER (2007) World Income Inequality Database, as well as global data on fiscal revenues derived from World Development Indicators and IMF publications (along with a few national sources). The first part of the chapter addresses the same issues as does Gómez Sabaini (2005), but with different measures. Unfortunately, the richest data sets (those from WDI and the IMF) list figures for central governments only. Although these fall somewhat short as measures of how tax policy in general affects society in general, data at the level of general governments are scarcer, and thus comparisons are more difficult. Later I will compare regional average tax revenue proportions on each base, but all the other global comparisons use central-government data. Where possible, I call attention mainly to changes rather than levels in order to reduce the confounding effect of cross-country variations in subnational revenues. Note also that in order to simplify the statistical analysis and adapt to the irregular temporal pattern of incomedistribution surveys, I have broken annual data into three periods: roughly from 1971 to 1980, between 1980 and 1995, and after 1995 (up to about 2005). The first section describes the context and nature of the tax reforms recently undertaken in the region. It is followed by a section that compares Latin America with global patterns of tax revenue and income distribution. The chapter then considers how and to what extent tax reforms affected income inequality, reviewing recent studies of tax incidence and country-bycountry patterns of reform and inequality. The next section considers the question of tax policy choice during the last generation, asking about its relation to authoritarianism, inequality, crises, and relations with international financial institutions. The chapter then turns to current policy options as illustrated by a few recent reforms in the region before touching on the connection between taxation and political incorporation.

Context and Nature of Recent Tax Reforms As of around 1965, most Latin American revenue systems were neither efficient nor progressive. They commonly included a museum of excises and stamp duties alongside more recently minted income taxes, as well as a complicated set of restrictions and tariffs on international trade. Individual and corporate income

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taxes, typically quite progressive on paper, proved much less so in practice. In some countries, personal income taxes fell almost entirely on formal-sector employees subject to withholding, while the richest citizens found even more ways to evade their obligations as international economic links multiplied (Best 1976; Bird 1992; Zolt and Bird 2005, 31–35). On the corporate side, the largest firms (especially foreign-owned corporations) often paid disproportionately because they combined a high profi le with a relatively complete set of books. Tax authorities remained legally weak and often administratively divided according to the type of tax collected. The irregularity of enforcement too often gave the impression that to be taxed was to be unfairly singled out. However, within this panorama, several common policies did act as more or less progressive taxes or, less often, subsidies. Among the former, the most common were penalty exchange rates on narrowly held or foreign-owned traditional exports. Among the latter, there were highly subsidized prices for public utilities and, in some countries, hydrocarbons. From the late 1960s to the late 1990s, a remarkably similar set of tax reforms swept across Latin America. “Reform” came to mean simplification, at least in theory: it often brought a decline in rate progressivity for both corporate and individual income taxes, together with an elimination or reduction of special exemptions from these taxes. But the most important substantive changes were the institution or expansion of the value-added tax (VAT), significant cuts in trade tariffs, and the strengthening of tax administration (Bird 1992; Shome 1995; Mahon 2004). These traits matched global trends (Thirsk 1997; Keen and Simone 2004). With these reforms, redistribution became a secondary goal of tax design rather than a primary one. Although reformers commonly compensated for gentler income-tax-rate graduation with more generous exemptions at the bottom, it is fair to say that as a whole, the reforms aimed more squarely at horizontal equity (across sectors or among households of comparable income) than at vertical equity (progressivity). This did not necessarily make fiscal policy as a whole less capable of redistribution. The idea was to raise more revenue (as a proportion of GDP) and spend it more intelligently on alleviating poverty (IDB 1998, 7). The enlarged revenue share, it was thought, could be borne more easily because the new taxes would be better administered and nondistortionary, part of a package designed to liberalize trade and bring robust economic growth.

How Latin America Stands Out: Indirect Taxes and Inequality Taxes

Today, compared with other regions of the world, Latin America stands out not only for its great reliance on indirect (consumption) taxation but also for

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the fact that during the past generation this trait has come to mark the region even more strongly. Table 10.1 shows trends in average central-government tax revenue proportions for seven groups of countries across the globe. Table 10.2 compares central-government proportions with those based on data for general governments (including subnational governments) for two kinds of taxes: those on goods and ser vices and those on personal income. As the table shows, proportions of tax types look similar regardless of whether they are computed on a general-government or central-government base. Turning now to central-government figures, we can see Latin America’s distinctiveness more clearly in graphic format. If we consider central governments’ degree of reliance on indirect and (all) direct tax revenues, Latin American countries appear as outliers when they are compared with historical OECD members as a group, but not when compared with the European members. Figure 10.1 shows direct (horizontal axis) and indirect (vertical) tax revenue proportions for these OECD countries between 1995 and 2000 (and Japan for an earlier period), with the average of thirteen Latin American countries during the same period represented by a larger gray square. As we can see, these OECD countries form two clusters, with former British settler colonies marking out a territory where direct tax revenues dominate those from indirect taxes (see also Messere, de Kam, and Heady 2003). Latin America appears comfortably in the European OECD cluster, though toward its upper left edge. However, we see things differently when we take revenues as a percentage of GDP and consider personal income taxes instead of the sum of all income taxes. Revenues as a percentage of GDP make a better measure of revenuecollection effort; personal income taxes make a better measure of a kind of redistributive effort because they are more likely than corporate taxes to have a redistributive effect. Now the Latin American anomaly becomes plain (figure 10.2). Not only do Latin American governments collect less in personal income taxes relative to economic size than those of any other world region or group, but they also have marginally reduced that collection during the past generation. As Gómez Sabaini (2005, 87) observes, whereas the rich countries reduced rates while closing loopholes and expanding the income-tax base, Latin America reduced rates while expanding loopholes and shrinking the base. Figure 10.2 shows two estimates for the change in tax revenue proportions, one based on compared averages of all data and the other (dotted line) restricted to the six countries with data for all four observations. (Data for general governments in both periods can be obtained for only three of the seven countries in Latin America noted in table 10.2, but they tell the same story.) Let us again compare variation across the region with global variation, looking at key variables one by one while breaking out individual countries on the charts. Figures 10.3 and 10.4 show consolidated central-government revenues for Latin America (fifteen countries) and the world (ninety-three

—

. () . ()

—

. () . ()

Communist countries as of  South and East Asia and Indies Middle East and North Africa . () . ()

—

. () . () . ()

. ()

Personal income taxes

. () . () . ()

. () . () . ()

. ()

Indirect taxes

. () . () . ()

. () . () . ()

. ()

Direct taxes

. () . () . ()

. () . () . ()

. ()

Personal income taxes

– averages (N)

. () . ()

—

. () . () . ()

. ()

Indirect taxes

. () . ()

Note: The figures for percentage-point changes in the third section of the table may differ from the differences between corresponding figures in the first two sections because they exclude countries lacking data for one of the time periods.

. () . ()

—

−. () −. () . ()

−. () . () . () —

−. ()

Personal income taxes . ()

Direct taxes

Average percentage-point change between periods (N)

Sources: World Bank (2004, 2007); IMF, Government Finance Statistics Yearbook and country reports; national data; author’s corrections.

. () . () . ()

. () . () . ()

OECD former Anglo colonies, Japan Latin America and Caribbean Sub-Saharan Africa

. ()

. ()

Direct taxes

OECD Europe

Group or region

Indirect taxes

– averages (N)

Table 10.1 Tax revenues as proportions of total central-government revenues: Averages for 1971–1980 and for 1995–2006 and changes by group or region Tax Reforms and Income Distribution in Latin America 317

. () . () —

Latin America

. () . ()

. () . () —

. ()

. ()

PYTgg, period 

. () . () . () . () . ()

. ()

. ()

PYT, period 

. () . () . () . () . ()

. ()

. ()

PYTgg, period 

. () . () — () . () . ()

. ()

. ()

TGS, period 

. () . () — () . () . ()

. ()

. ()

TGSgg, period 

. () . ()

. () . () .

. ()

. ()

TGS, period 

. () . ()

. () . () .

. ()

. ()

TGSgg, period 

Note: PYT = personal income tax; TGS = taxes on goods and ser vices; period 1 = average from 1971 to 1980; period 3 = from 1995 to end of data (usually around 2002). In order to maximize sample sizes, averages comprise all observations with data for a time period and a given type of tax across both central- and general-government figures. Comparisons across periods can be made only where the same countries make up the average in both periods (figures in italics).

Source: IMF, Government Finance Statistics Yearbook, various issues.

Middle East and North Africa

South and East Asia

Ex-Communist countries

. () . ()

. ()

OECD ex-Anglo, Ireland, Japan

Africa

. ()

PYT, period 

OECD Europe

Region

Table 10.2 Regional averages of same-country central-government and general-government figures (sample sizes in parentheses)

318 taxation and social policies

0

10

Sweden

Norway

30

40

50

Canada

Australia

60

United States

Japan, 1988–93

New Zealand

Percentage of total from taxes on income, profits, and capital gains

20

Other OECD countries

13 Latin American countries

Iceland

70

0

5

10

15

20

25

Public and compulsory private social spending as percentage of GDP (trend line only)

Percentage of total from taxes on goods and services

fig. 10.1 Income versus goods/ser vices taxation in central-government revenue, historical (pre-1991) OECD countries compared with average of thirteen Latin American countries (averages of 1995–2000 period for all but Japan). Sources: World Bank (2004); IMF, Government Finance Statistics Yearbook, various issues. Note: Trend line is for social spending, historic OECD, average of 1995 and 2000 figures.

0

10

20

30

40

50

30

60

Greece

35

70

Tax Reforms and Income Distribution in Latin America 319

0

2

4

6

8

10

12

14

16

0

Latin America, 1971–80

Latin America, 1995–2000

Switzerland

2

South and East Asia

Sweden

4

Middle East and North Africa

Greece

Other OECD countries

8

10

United States

Canada

United Kingdom

12

Australia

Ireland

Revenue from personal income taxes as percentage of GDP

6

Japan, 1988–93

Germany

SubSaharan Africa

Former Communist

Norway

Denmark

Italy

14

New Zealand

Belgium

16

fig. 10.2 Personal income and indirect tax revenues as a percentage of GDP, historical OECD countries (1995–2000, except Japan) compared with Latin American averages (1971–80 and 1995–2000, two estimates) and other regional averages (1995–2000). Sources: World Bank (2004); IMF, Government Finance Statistics Yearbook, various issues.

Revenue from taxes on goods and services as percentage of GDP

18

320 taxation and social policies

Central-government revenues as percentage of GDP (1995–2000 average)

3.4

Bolivia

3.5

3.6

Guatemala

Nicaragua

Peru

3.8

Colombia

Dominican Republic

Log GDP per capita (1995–2000 average)

3.7

Paraguay

Brazil

Venezuela

3.9

Mexico

Costa Rica

Panama

4

Uruguay

4.1

Argentina

R² = 0.0092

Chile

fig. 10.3 Total revenue versus GDP per capita, fifteen Latin American countries. Sources: World Bank (2004); IMF, Government Finance Statistics Yearbook, various issues.

0

5

10

15

20

25

30

Tax Reforms and Income Distribution in Latin America 321

Central-government revenues as a percentage of GDP (1995–2000 average)

2

2.5

3

3.5 Log GDP per capita (1995–2000 average)

4

4.5

Latin American countries

5

y = 10.605x - 14.405 R² = 0.2772

fig. 10.4 Total revenues versus GDP per capita, ninety-three countries. Sources: Revenues from World Bank (2004); IMF, Government Finance Statistics Yearbook, various issues. GDP per capita from Heston, Summers, and Aten (2006).

0

10

20

30

40

50

60

322 taxation and social policies

Tax Reforms and Income Distribution in Latin America

323

countries) as averages for all years from 1995 onward with usable data (usually up to about 2002). Globally, we see a moderately well-defined Wagner’s law trend of higher revenue/GDP as per capita income rises. But in figure 10.4 all but one of the Latin American countries (larger open squares) lie below the trend line. And for Latin America taken alone (figure 10.3), Wagner’s law does not apply: at least with these data, the correlation of revenue as a percentage of GDP with per capita income is basically absent. When we look at tax proportions, we see a big difference between indirect and personal income taxes. We see the former in figures 10.5 and 10.6, which plot central-government revenue from indirect taxes against GDP for fifteen Latin American countries and for a global set of ninety-one countries. This time, Latin American countries show more dispersion across the world trend line, although it bears noting that nine of the fifteen lie below it. Again, across the region, indirect tax revenue as a percentage of GDP and per capita GDP show no real trend—if any, a weak negative one (strongly influenced by Nicaragua, upper left)—while the world as a whole shows a visible but fairly weak positive trend line (here Tunisia is the greatest positive and the United States the greatest negative outlier). We see a very different picture with personal income taxes. In figures 10.7 and 10.8, Latin American idiosyncrasy is on full display, with all countries well below the global norm. This time the regional dispersion has a similar upward trend to the global one, although it is less well defined. But its linear trend slope (1.52) is only one-third that of the global line (4.56), suggesting that if the region followed current trends as it got richer, it would deviate even further from the norm. The message is this: relative to income or in absolute terms, Latin America’s aversion to personal income taxation is dramatic, regionally consistent, and (absent major efforts) likely to continue. Inequality

This message ought to sound even more significant when it is juxtaposed with the fact that Latin American societies are also among the most unequal in the world. Widely circulated estimates compiled by Deininger and Squire (1996, 584–85) place the region at the top of the world in average inequality from the 1960s to the 1990s. However, this comparison is not fully confi rmed by a careful parsing of UNU-WIDER data that looks only at similar survey parameters and quality levels across regions (table 10.3). Still, by some measures Latin American regional inequality rose in the 1990s, just as Latin America completed its round of “neoliberal” tax reforms. Figure 10.9 shows the simple average of tax revenue proportions along with the results of two bundles of income-distribution surveys compiled by ECLAC (2007), the first from 1989 to 1991 and the second from 2001 to 2003,

0

2

4

6

8

10

12

14

16

3.4

Bolivia

3.5

Guatemala

Nicaragua

3.6

Peru

Colombia

3.8

Panama

Dominican Republic

3.9

Mexico

Brazil Venezuela

Log GDP per capita (1995–2000 average)

3.7

Paraguay

Costa Rica

4

4.1

R² = 0.0186

Chile

Argentina

Uruguay

fig. 10.5 Revenues from indirect taxes versus GDP per capita, fifteen Latin American countries. Sources: Revenues from World Bank (2004); IMF, Government Finance Statistics Yearbook, various issues. GDP per capita from Heston, Summers, and Aten (2006).

Revenue from indirect taxes as percentage of GDP (1995–2000 average)

324 taxation and social policies

0

2

4

6

8

10

12

14

16

18

2

2.5

3

3.5 Log GDP per capita (1995–2000 average)

4

4.5

y = 3.2256x - 4.486 R² = 0.1706

fig. 10.6 Revenues from indirect taxes versus GDP per capita, ninety-one countries. Sources: Revenues from World Bank (2004); IMF, Government Finance Statistics Yearbook, various issues. GDP per capita from Heston, Summers, and Aten (2006).

Revenues from taxes on goods and services as percentage of GDP (1995–2000 average)

20

5

Tax Reforms and Income Distribution in Latin America 325

Revenues from personal income taxes as percentage of GDP (1995–2000 average) except Chi, Gua, Mex, Par (1980–95)

3.4

3.5

Bolivia 3.6

3.7

Paraguay

Colombia

3.8

Venezuela

Brazil

Log GDP per capita (1995–2000 average)

Guatemala

Peru

Dominican Republic

Costa Rica

3.9

Panama

Uruguay

4

Chile

Argentina

y = 1.5291x - 5.0636 R² = 0.1526

Mexico

4.1

fig. 10.7 Revenues from personal income taxes versus GDP per capita, fourteen Latin American countries. Sources: Revenues from World Bank (2004); IMF, Government Finance Statistics Yearbook, various issues. GDP per capita from Heston, Summers, and Aten (2006).

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

2

2.2

326 taxation and social policies

0

2

4

6

8

10

12

14

2

2.5

3

3.5 Log GDP per capita (1995–2000 average)

4

4.5

Latin American countries 5

y = 4.5641x - 13.327 R² = 0.2747

fig. 10.8 Revenues from personal income taxes versus GDP per capita, seventy-eight countries. Sources: Revenues from World Bank (2004); IMF, Government Finance Statistics Yearbook, various issues. GDP per capita from Heston, Summers, and Aten (2006).

Revenues from personal income taxes as percentage of GDP (1995–2000 average)

16

Tax Reforms and Income Distribution in Latin America 327

328

taxation and social policies

Table 10.3 Group average Gini coefficients, using three standards of survey parameters and quality, two periods Average of UNU-WIDER () Gini coefficients for:

Group or region (number of countries) OECD Europe () OECD former Anglo settler colonies, Ireland, and Japan () Latin America and Caribbean () Sub-Saharan Africa () Communist countries as of  () South and East Asia and Indies () Middle East and North Africa ()

Income or earnings, survey quality –

Income or earnings, survey quality –

through 

–

through 

–

through 

–

. () . ()

. () . ()

. () . ()

. () . ()

. () . ()

. () . ()

. () . () . () . () . ()

. () . () . () . () . ()

. () . () . () . () . ()

. () . () . () . () . ()

. ()  () . () . () . ()

. ()  () . () . () . ()

Disposable income, survey quality –

Sources: UNU-WIDER (2007) and author’s calculations. Notes: Surveys include only those covering all populations, ages, and areas within each country and that use the same equivalent income share unit (household) and unit of analysis (person). All use some correction for income equivalence for ser vices (household per capita).

for thirteen countries. A clear rise in the ratio of fift h-quintile (rich) to firstquintile incomes coincides with a substantial increase in the proportion of revenue from indirect taxation. Given all this, it is natural to suspect a link between indirect taxation and inequality (see Fairfield 2007, note 2). It is also worth asking why, in a region that was so unequal to start with, so many governments opted for tax reforms that, at the very least, gave redistribution secondary importance. Let us consider these questions in turn.

Did Neoliberal Tax Reforms Worsen Inequality? The critique of “neoliberal” tax reforms in Latin America alleges that new indirect taxes, falling broadly on consumption, have contributed to worsened inequality in the region. As I noted earlier, this is a reasonable hunch. When we look more closely, what do we see?

Tax Reforms and Income Distribution in Latin America

Percentage of total revenues and Q5/Q1 ratio

45 40

329

Taxes on goods and services Taxes on income, profits, or capital gains Ratio of top to bottom quintile income shares

35 30 25 20 15 10 5 0 1975

1980

1985

1990

1995

2000

fig. 10.9 Tax revenues by type (as proportion of total revenue) and income distribution, thirteen Latin American countries. Sources: Revenues from World Bank (2004, 2007); IMF, Government Finance Statistics Yearbook, various issues; author’s corrections for mineral rents booked as corporate tax. Income distribution, ECLAC (2007), with Deininger and Squire (1996) as noted. Notes: Countries are Argentina, Bolivia, Brazil, Chile, Costa Rica, Ecuador, Guatemala, Mexico, Nicaragua, Paraguay, Peru, Uruguay, and Venezuela. No observations for Brazil 99-02, Guatemala 83-89, Nicaragua 87, and Venenuela DT 02. Early distribution figure for Nicaragua is from 1993. Early figure for Peru is from 1994, Deininger and Squire (1996); large difference between ECLAC (used) and Deininger and Squire figures for Venezuela 1989–90.

Micro Evidence

Recent studies of tax incidence provide some evidence of a link. They generally show that (graduated) income taxes have a progressive effect and valueadded taxes a regressive effect (for a general overview, see Morley 2001). However, the estimated magnitudes tend to be small, VAT exemptions matter, and all authors regard the conclusions as tentative (Chu, Davoodi, and Gupta 2000 provide a summary). Gemmell and Morrissey, looking at data mostly from African countries, argue that “general conclusions with respect to particular taxes are quite hard to find—progressivity or regressivity conclusions are often country-specific” (2003, 26). However, they do suggest that the VAT can be more progressive than import taxes or many excises and that it will be more progressive (or less regressive) if it exempts necessities (19– 26). Zolt and Bird also emphasize the shortcomings of tax-incidence studies: “The available evidence on tax incidence in developing countries is neither conclusive nor persuasive” (2005, 18). Recent work in Latin American countries supports the conclusion that recent tax reforms have made the region slightly more unequal. Looking at

2005

330

taxation and social policies

Chile, Engel, Galetovic, and Raddatz conclude that even radical changes in the tax code or heroic assumptions about tax compliance—such as a complete end to evasion of the income tax, a major hike in the VAT rate, or the institution of a flat income tax—would have very small effects on income distribution (1997, 175–82). The authors also show that under plausible assumptions, the total revenue from a tax has a bigger impact on redistribution than does its progressivity, and that this margin rises as a country’s income distribution is more unequal (182–87). Studies of other countries concur. Looking at seven countries, Lora finds that income taxes are progressive, while in five of seven, the VAT is regressive (2007, table 6.8, 204). His estimated effects on after-tax income distribution (the Reynolds-Smolensky measure, which does not use a computable generalequilibrium framework) were very small. Using a somewhat cruder measure, Barreix, Roca, and Villela (2007) find that the VAT is regressive in Bolivia, Colombia, and Peru (in the last country also on the basis of data from Haughton 2005), but progressive in Ecuador and Venezuela (2007, 19–21). They find that the tax system as a whole is regressive in Bolivia and Peru and neutral in Colombia; they also calculate that the effects are an order of magnitude greater than does Lora (ibid., 58). Similar estimates come from the compilation of Gómez Sabaini (2005), who also reports a particularly high regressive effect (a 35.7 increase in the Gini coefficient) for Nicaragua’s heavily consumptionbased tax regime (101). Finally, Goñi, Lopez, and Servén find a regressive effect of indirect taxes in Brazil, Chile, Colombia, and Peru (and little effect in Argentina and Mexico), but only in Peru did indirect and direct taxes together increase inequality (2008, 7–8). Circumstantial Macro Evidence

Do we see a correspondence between tax reform and rising inequality in country-level data? Here we have to be very careful because survey methodologies vary greatly even for the same country, and the quality of surveys in most developing countries has until recently been poor. Using the incomedistribution measures from the UNU-WIDER World Income Inequality Database, we face an important trade-off between sample size, on the one hand, and sample quality and comparability, on the other. With this caveat in mind, the first thing I can say is that my regional comparison needs to be revised somewhat from the picture derived from Deininger and Squire (1996), noted earlier. According to the data presented in table 10.2, it is Africa, not Latin America, that leads the world in average inequality, although this finding is based on relatively few surveys. In addition, it appears that inequality in Latin America rose only modestly after 1994. However, one point in favor of the connection between tax reform and inequality is that the only group to have relied

Tax Reforms and Income Distribution in Latin America

331

more on indirect taxation in the period after 1994 (former Communist countries) also saw the largest jump in inequality (at least where the groups were represented by more than one survey each). Assessing country-level patterns requires the judicious use of heterogeneous income-distribution surveys (see online appendix, details available on request). By these estimation criteria, three countries (El Salvador, Guatemala, and Mexico) saw falling Gini coefficients, two (Peru and Ecuador) had little change, and the other ten countries saw rising inequality during the period from about 1970 to about 2005. These charts also suggest a weak correspondence between tax reform and greater inequality. If we ignore the imprecision that particularly marks the early Gini estimates, we can also generate a crude regression across countries between estimates of changes in the Gini and taxreform indexes. As figure 10.10 tells us, this regression does show a positive trend, indicating that more tax reform corresponded to increasing inequality. But there are huge uncertainties here, beginning with the variable quality of the income surveys and the subjective nature of the reform indexes used here. And of course, even apart from measurement error, we must remember that

10

Arg

Par 5

Bol Chi DR

Col

CR Ecu

Bra

0

Ven

Uru

Per Gua Mex

-5

El S

.3

.4

.5

.6

.7

Average combined tax-reform index 95% CI Gini change in interval

Fitted values

fig. 10.10 Average of combined Morley, Machado, and Pettinato and Lora tax-reform indexes, 1970–2003 (x) against estimated change in Gini coefficient (y) by country. Sources: Income distribution (Gini coefficients) from UNU-WIDER (2007), surveys of quality ranking 1–3 only, weighted by quality. Tax reform indices combine Morley, Machado, and Pettinato (1999) and Lora (2007).

332

taxation and social policies

these are all simple bivariate relationships, although we know that in many of these countries lots of major changes came at the same time as tax reform— trade liberalization, privatization with layoffs of public employees, devaluation— and might have had much larger effects on income distribution. All in all, these micro and macro results suggest that the tax reforms caused (ceteris paribus) some distributional deterioration. The effect of reform was probably small. Perhaps this is because tax changes tend to be far less important for redistribution than are spending changes, a point I will revisit later.

Why Was There So Much Reliance on Indirect Taxation? Let us now turn to the second question asked earlier. Having embraced globalization and cut taxes on trade, Latin American governments could have chosen to make up for lost income by leaning harder on either direct taxation (on income, profits, or property) or indirect taxation (on goods and ser vices). Why did they decisively choose the latter, given that they were already doing so to an unusual extent? Moreover, across much of the region, primary (pretax) income distribution was becoming more unequal because of deindustrialization and the renewed embrace of commodity exports (Barreix, Roca, and Villela 2007, 6). Why, then, should so many governments have enacted policies that could have been assumed to make inequality worse? Widely cited models of fiscal politics say that they should have done the opposite. Alesina and Rodrik (1994), using a median-voter model, posit that as inequality rises, voters prefer higher taxes and more government-enacted redistribution. As more people are left behind, the argument goes, they form a majority that imposes progressive taxes. But Agosin et al. (2005) suggest an opposite effect: more egalitarian countries have more influential middle-income sectors, and these demand public ser vices via the state, driving expenditures and taxes up. (This question is taken up empirically by Blofield and Luna in chapter 5 in this volume.) But maybe the problem is not the middle class. After all, this is a region whose inequality arises mainly from the extraordinary incomes of its richest 5 to 10 of households (De Ferranti et al. 2003, 2–3). Richard Bird suggests that Latin American countries do not have more egalitarian tax systems than they do because the politically relevant population is small and rich and likes things the way they are (2003, 2, 13, 42–43; Best 1976). But this speaks to historically stable patterns and not to the nature of reforms. To explain change, we would have to adopt something like Krugman’s (2006) argument about the direction of policy in the United States under Republican administrations, which deliberately weakened equality-promoting institutions (including

Tax Reforms and Income Distribution in Latin America

333

progressive features of the tax code) even after primary income had become more unequally distributed. That is, it implies that the median voter changed her or his opinion, or that the “politically relevant population” became restricted to the upper-income brackets. Do we see evidence of these effects in the making of Latin American tax policy? Yes, to some degree, but not necessarily for perverse reasons. As I noted in a previous article (Mahon 2004), moments of reform in the 1977–95 period tended to follow periods of high inflation, take place under newly seated governments, and involve negotiations with (and advice from) the IMF, often with tax reform as an explicit performance condition (18–23). I also found that these governments were not more likely to be authoritarian than were nonreformers. One drawback of that earlier study is that its coverage begins after the VAT had been initiated across most of the region. Were VATs more likely to be adopted by undemocratic regimes before then? If we knew only that the first VAT in Latin America appeared in Brazil in 1967, it would be easy to conclude that the turn toward modern indirect taxation corresponded with exclusionary, technocratic, and antipopular policy making in the region’s most unequal countries. The significant reform in Chile during 1975 would reinforce that impression (Berry 1998). But the broader picture looks more complicated. As we can see in table 10.4, a variety of regimes implemented the VAT. We can discern spatial effects in its adoption—reforms often quickly followed others in adjacent countries—and a few periods in which reforms were more common than in others. As for regime type, in just more than half the reform moments listed in the table, the governments instituting the VAT were less democratic and less liberal than the region as a whole in that year, but before 1977 more reformers exceeded the regional democracy norm than did not. The table supports the idea that the pre-1977 pattern does not diverge significantly from that described for 1977–95, at least on one point: we find no reason here to associate VATs with undemocratic regimes. Do we see any evidence of an elective affinity between greater inequality and neoliberal tax reform? Again, no. Figure 10.11 shows a scatter-plot of initial Gini coefficients (estimated from the country charts in the online appendix, derived from UNU-WIDER data) against the dates of VAT implementation. It shows no relationship. Figure 10.12 plots the same initial Ginis against the average of a tax-reform index that combines the two shown in the country charts (Morley, Machado, and Pettinato’s [1999] to 1995 and Lora’s [2007] from 1996 to 2003). Again we find little relationship, along with a predicted coefficient close to zero. However, like the reforms after 1977, several circumstances surrounding VAT initiation before that time did tend to limit popular participation. First, conditions often favored government autonomy. In many cases (Brazil and

334

taxation and social policies

Table 10.4 Regime-type indicators for seventeen Latin American countries at date of initiation of VAT Regime (polity) (–,  is most democratic)

Country Brazil Uruguay Ecuador Bolivia Argentina Chile Colombia Costa Rica Nicaragua Honduras Peru Panama Mexico Haiti Guatemala Paraguay Venezuela

Civil liberties (Freedom House) (–,  is greatest civil liberties)

Political rights (Freedom House) (–,  is greatest political rights)

Year Score in Lat Am Score in Lat Am Score in Lat Am VAT year VAT avg in year VAT avg in year VAT avg in began began that year began that year began that year                 

. . . . . . . . . . . . . . . . .

. . . .

.

. . . . . .

             

.

.

. . . . . .

             

.

.

. . . . . .

Sources: Marshall and Jaggers (2006); Freedom House, Freedom in the World, various issues (http://www.freedomhouse.org/template.cfm?page = 15). Note: Polity regime indicator combines democracy and autocracy scores; Latin American average calculated over twenty-one countries.

Uruguay in 1968, Bolivia in 1973, and every country in 1975), reforms came during periods of inflation that had accelerated well beyond recent norms in the country (even though rates were much higher in some countries than in others). This created a climate of crisis that facilitated autonomous action, especially by new administrations (Colombia, Uruguay, Costa Rica, and Peru). Also, we should not ascribe their emphasis on inflation fighting to elite manipulation: especially for the unorganized and informal, inflation was an insidious and regressive tax. Popular support for inflation fighting probably enhanced presidents’ ability to pursue the technocratic enterprise of reform. Second, where governments also faced foreign payments crises—as many did after the oil shocks of 1973–74—they ended up in the arms of the IMF. In fact, of the twelve countries that adopted a VAT before 1978 (table 10.3), seven were under IMF standby agreements at the time of adoption, and one (Argentina) was borrowing under the Compensatory Financing Facility. In

55

Tax Reforms and Income Distribution in Latin America

Bra Ecu Bol

Gua Per Col

Mex

Chi

50

335

El S Par

45

DR CR

40

Ven Uru Arg 1960

1970

1980

1990

2000

Date VAT began 95% Cl Initial Gini

Fitted values

fig. 10.11 Estimated initial Gini (y) and date of first implementation of value-added tax (x) by country. Sources: Income distribution (Gini coefficients) from UNU-WIDER (2007), surveys of quality ranking 1–3 only, weighted by quality. Tax reform indices combine Morley, Machado, and Pettinato (1999) and Lora (2007).

addition, the other four (Nicaragua, Honduras, Costa Rica, and Peru) were about to borrow under the Oil Facility, and the last two of these soon also signed standby agreements (IMF, Annual Report, various issues). Many of these countries were also in close contact with World Bank officials. When governments came to Washington with problems deriving from fiscal deficits, the IMF’s remedy of choice was the VAT, both for its revenue potential and for its efficiency. Third, the incomes and assets of the rich were becoming even harder to tax. This was especially important for the reforms undertaken after 1980 or so because capital flight put assets of the wealthy out of reach (Tanzi 2003, 330, 344). As globally connected financial advisers found Latin clients, transaction costs for the hiding of income and the international transfer of wealth fell and stayed low. Perhaps debt-loaded governments (or their IMF advisers) were more impressed by this than they should have been. As Gómez Sabaini (2005, 111–12) observes, fears of lost investment and capital flight made Latin American governments reluctant to modernize their income-tax systems up

taxation and social policies

55

60

336

Gua Mex

50

El S

Ecu

Bra Bol

Per Col Chi

Par

45

DR CR

40

Ven

Uru

Arg .3

.4

.5

.6

.7

Average combined tax-reform index 95% Cl Initial Gini

Fitted values

fig. 10.12 Estimated initial Gini (y) and average of combined MMP and Lora tax-reform index, 1970–2003 (x), by country. Sources: Income distribution (Gini coefficients) from UNU-WIDER (2007), surveys of quality ranking 1–3 only, weighted by quality. Tax reform indices combine Morley, Machado, and Pettinato (1999) and Lora (2007).

to developed-country standards, despite the recommendations of the OECD. Fairfield (2007) describes vividly the political difficulties of the Argentine authorities in imposing a tax on interest income. But maybe they were right to be cautious: in recent experience in Latin America, private overseas assets can represent a substantial portion of investment capital. Governments that had committed themselves to a neoliberal economic model were worried about growth. They wanted not only to avoid scaring capital away but also (and this was especially important in the 1990s) to lure it back. Thus the same top-heavy pattern of inequality that makes redistribution a vital issue in Latin America also made treating capital with kid gloves a defensible choice on pragmatic grounds, just as it appears to have motivated left-to-right policy switches (Wibbels and Arce 2003; Campello, chapter 6 in this volume). It might also be true that in highly unequal societies, capital mobility helps preserve democracy, however depleted in content it becomes (Mahon 1996, 181; Boix 2003, 38–43). Finally, there was the promise of additional spending. Reformers argued that a regressive tax system would not pose a problem for income distribution

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if its revenues were ample and progressively spent. Of course, they were right. Barreix, Roca, and Villela (2007, 55–60) show (on the basis of OECD figures) that Sweden, Denmark, and ( just barely) Finland have regressive tax systems, but once spending is considered, they are all highly redistributive, just like the rest of Europe (see also Lopez and Perry 2008, 18). But Latin American countries, like most developing countries, have done poorly at spending progressively. Zolt and Bird (2005) cite Chu, Davoodi, and Gupta (2000) to the effect that “before the effects of redistributive tax and transfer programs are taken into account, income inequality is actually lower on average in developing countries than in the developed countries” (Zolt and Bird 2005, 12). In fact, the 2000 study refers to a sample of thirty developing and transition countries from Deininger and Squire (1996). The transition countries make up more than half the sample and uniformly show much more equal income distribution, a legacy of Communist rule. However, the authors’ narrower point is more defensible and important: although developed countries have used fiscal transfers effectively to reduce inequality, developing countries largely have not (Zolt and Bird 2005, 12). Barreix, Roca, and Villela do estimate that in Bolivia, Colombia, and Peru, taxes and expenditures together reduce Gini coefficients by 0.03 to 0.05 (2007, 58). But in Lora’s judgment, Chile is the only developing country to orient major social spending effectively toward redistribution (2007, 205). At least since 1990, the problem is not that expenditure has declined. In Latin America, social spending rose from 9.3 of GDP in 1990 to 12.2 in 2003 and above this by 2007 (ibid.; ECLAC 2007). But the spending is still often poorly targeted, with large payments for tertiary education and especially public-sector pensions enjoyed by the relatively wealthy (Heady 2004, 140–41; Zolt and Bird 2005, 48; Goñi, Lopez, and Servén 2008, 18–21). Only in the last decade have we seen the spread of effective conditional cash-transfer programs, for example. As the bad targeting implies, it was a mistake to assume away political constraints on the spending side when designing tax policy (Martínez Franzoni and Voorend, chapter 11 in this volume). Sometimes, poor targeting resulted from the universalistic approach (say, with tertiary education) crucial to the political viability of a program. In other cases, it stemmed from the resistance of urban middle sectors, especially public employees. The irony is that neoliberal tax reformers and international advisers invoked a similar realism about political-economic and administrative limitations when they argued for a less redistributive tax code with the promise that greater revenues would make additional redistribution possible via spending. Let me sum up. Regional comparisons suggest that Latin American governments have historically relied on indirect taxation to an unusual degree, and that they deepened this reliance (outdone here only by transition countries) in

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the most recent wave of reforms. Even if we take as a given their embrace of trade liberalization, these governments could have replaced lost tariff revenue with higher income taxes. But they did not, for a variety of reasons. Crises fortified their technocrats and brought them to the IMF; the IMF had a readymade remedy for fiscal insufficiency; the dominant intellectual currents validated it; and reformers (not disingenuously) promised more spending. And especially after 1980 or so, liberalized international fi nance opened new opportunities for capital flight and tax evasion by elites. It is on this last point that we see the most significant influence of Latin American inequality, especially in the aversion to personal income taxes on the richest. But many other forces—administrative limitations, the pressing need for revenue, intellectual currents, and prodding from multilateral banks—drove the adoption and expansion of the VAT.

Where to Go from Here? As Latin American governments now seek to raise revenues and reduce inequality, what reforms are desirable and feasible? I would first like to describe three general ways of responding to these challenges before giving a few additional reasons that obtaining more revenue ought to be top priority for most countries. The three ways are extending and deepening the reforms from the neoliberal package (VAT, base broadening, simplification, and better administration); backsliding from neoliberalism, for pragmatic or political reasons, in adopting taxes that are neither neoliberal nor effectively redistributive; and adding new taxes or efforts to tax with clear redistributive intent. Looking across the variety of recent tax reforms, we can see cases that exemplify each of these to some degree, although all recent reforms appear to have at least a bit of each. Extending Neoliberal Reforms

Here we might include administrative reforms aimed either at reducing evasion or at cutting the cost of taxation, the abolition of special exemptions or promotions, or (most common in recent years) efforts to include more kinds of activity under the VAT. Sometimes the last measure is an explicit attempt to add back parts of an original reform that were subtracted because of political opposition. Important examples of extension in the past decade are reforms in Panama (2002, 2005), Colombia (2006), and the Dominican Republic (2006). In this category we might also place the long-proposed VAT simplification reform in Brazil, which by now can be seen as reversing the pragmatic but distortionary adjustments of the past two decades (see Werneck 2000).

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By definition, the most important reforms of this kind aim at the informal sector. It has been argued that because agents in the informal sector are more likely to pay VAT on their inputs than they are to charge it on their sales, they are good candidates for inclusion in the tax, if tax administration is capable enough (see Bird 2003, 28; 2008, 13). However, Bird and Gendron (2007, 77– 80) caution against pushing this too hard because of the risk of discouraging formality. (We would also have to consider the effect on these agents as consumers of informal-sector goods.) Most such taxes involve some kind of presumptive assessment. The Peruvian tax reforms of 1991–92 tried to do this but retreated in the face of a strike by market vendors (Arce 2006). One provision in the 2007 Mexican reform, the tax on large bank balances, also had this intention. Reversing Neoliberal Reform Without Effective Redistribution

Here is perhaps the most common kind of tax reform (along with VAT rate hikes). As just noted, Brazil has been a good example, although it has not totally failed at redistribution because its reforms did succeed in increasing revenue, and the tax system as a whole appears to be slightly progressive. Other measures include financial transactions taxes; new exemptions, VAT zero ratings, or tax-free zones; and new (cascading) sales taxes on specific items. The rise in corporate tax rates in the 2007 Mexican package also fits here. It shows that there is room to raise corporate taxes in some countries without suffering political damage, but especially in Mexico, it is unclear whether this will have a progressive incidence. New Moves Toward Systematic Progressiveness

Under this rubric we might put new excises on luxury items (e.g., the 2008 Impuesto a los Consumos Especiales in Ecuador); property taxes, especially on unimproved land; and most important, new personal income taxes. A good example of the last is the 2007 reform in Uruguay, which reimposed that tax for the first time since its abolition in 1973. The Ecuadorean government’s proposal for steeper income-tax graduation belongs here also. For those who advocate higher personal income taxes (Filgueira, chapter 1 in this volume), the Uruguayan case illustrates a hopeful point. Significant improvements in administration accompanying the VAT and other recent reforms can be turned toward redistribution. In particular, as Keen and Simone note, “Adoption of the VAT is often intended to spearhead a fundamental change in how taxes are collected, in particular by introducing methods of self-assessment—that is, self-declaration of liability by the taxpayer supplemented by risk-based audits—that can then be applied to other taxes” (2004,

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319). The Uruguayan tax authorities are much more capable than they were in 1973—indeed, the same can be said of every country in the region. Why Revenue Matters

Obviously, if there is more to spend, more can be redistributed. Even higher indirect taxes might be tolerable, provided governments spend the revenue well. Sweden shows that a country can have a highly regressive tax system but a highly progressive fiscal system (Barreix, Roca, and Villela 2007, tables 32 and 34). As noted earlier (figures 10.2 and 10.3), Latin America already has Swedish levels of indirect and personal income taxes as proportions of total revenues, even though its average figure for revenue as a percentage of GDP is much lower than Sweden’s. The similarity became especially strong after 2001, when more of Sweden’s tax burden shifted to corporate and indirect taxes. If Engel, Galetovic, and Raddatz (1999) are right, Latin America is better suited than are less unequal areas for tax systems that maximize revenue rather than progressivity. It is also relevant to note that common alternatives to additional revenue in Latin America—inflation and borrowing—are as bad as or maybe worse than indirect taxes in distributional terms. A variety of studies have concluded that inflation, especially in developing countries, hurts the poor more than the rich (but see Lopez and Perry 2008, 6–8). Easterly and Fischer (2001) find that the subjective concerns of poor respondents about inflation correspond well with econometric results showing a significant negative relationship between inflation and various measures of poor people’s income. As for borrowing, if we consider the net distributional implication of future interest payments out of future taxation, the result is also likely to be negative. For internationally held debt, the distributional issue has historically been less salient than debtor-creditor relations buffeted by cycles of boom and default. But as more Latin American countries’ debt is held domestically and is issued in domestic currency—and both amounts appear to have increased lately (Cowan et al. 2006)—the impact of regressive tax-to-interest transfers might begin to register in national income distribution.

Final Thoughts: Fiscal Covenants and Political Incorporation A recent ECLAC book urges Latin Americans to consider the public funding of social protection as a kind of social contract, to be drawn up and affirmed by key societal representatives at meetings convened by national governments (2006, 31–32, 35–42). Its key pillar would be a “fiscal covenant,” which would begin with an acknowledgment of governments’ right to collect taxes

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and an agreement on the level of taxation appropriate to the country’s social needs and economic capacity. The process would also set up mechanisms of oversight and accountability in the use of the funds (40). The authors hope to deepen taxpayers’ appreciation of the benefits all could expect from higher government spending in the form of higher productivity, stronger institutions, enhanced social capital, and reduced crime (31). This is an idea with deep roots. It recalls the exchange of revenue for institutional accountability and representation at the heart of Britain’s Glorious Revolution, lately turned into the empirical claim “no representation without taxation” in comparative politics (for example, Levi 1988; Moore 2004; Friedman 2006; on Latin America, see Bird 2008, 19–20). It seems to offer taxpayers less (or less in the form of institutions) than the British Crown offered the Whigs in 1688, but the form is the same. It also resembles the idea of political incorporation, whereby political actors win the organized support of societal actors such as unions in exchange for legal recognition, economic benefits, and symbolic inclusion in the national polity (Collier and Collier 1991; Filgueira et al., chapter 8 in this volume). The ECLAC proposal posits a societywide bargain rather than a sectoral one, and its main beneficiaries (i.e., members of the informal sector) are generally not comprehensively organized. But the incentives for politicians—expanded support in exchange for tax-funded social protection—look similar. But this idea cannot succeed on these terms with the proposed contributors on one side of a table and the proposed beneficiaries on the other. It has to involve “an acknowledgement that everyone must pay taxes and respect the rights of others” (ECLAC 2006, 31). Otherwise, capital will flee or stay away. With reference to the informal sector, inclusion in the country’s social security system (as recently begun in Uruguay) might be possible (even at minimal benefit levels) only in the richest Latin American countries. That is, incorporation on these terms is least feasible where it is most needed. In many of the poorest countries, the informal sector makes up more than half the economically active population, while public administration is weak. There, a basic insurance benefit might be possible only in return for payment of a simplified minimum or presumptive tax. In a larger sense, the mere fact of this ambitious proposal—for a kind of fiscal refounding of Latin American states—suggests something more profound at work. The Latin American conjunction noted earlier, between inequality and extremely low revenues from personal income taxes, seems to have had both old and new origins. The old ones go back at least as far as the widespread postindependence failures at direct taxation of elites (Bushnell 1954, 108; Centeno 2002, 118–26). As Hernández Pico puts it, “Taxes were seen as emblematic of state exploitation and tyranny and ‘political freedom’ meant beating them back to a minimum” (2000, 2). The second, new origins relate

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not only to the new opportunities for capital mobility afforded by financial globalization but also, I believe, to the sense that with the failure of the importsubstitution industrialization (ISI) model and the rise of privatized benefits (including security), the elite now need the state much less. In effect, the national bourgeoisie has become disincorporated, thus joining the never-incorporated fractions of the upper classes in an adversarial relationship with the tax authorities (Reis, chapter 3 in this volume). This is why covenants make sense, and why political rules and culture matter. Public covenants offer an alternative to clientelistic “incorporation” via crony capitalism behind a neoliberal screen, instantiating a moment of public accountability instead of private favors. Fiscal goals require tax compliance, and compliance depends on the expectation that everyone pays. In turn, it is this certainty of tax obligation that motivates big taxpayers to demand accountability. And in order to have the greatest chances of success, all this should take place within a clearly articulated national project and via the mass media (Hughes and Prado, chapter 4 in this volume), an affirmation of political responsiveness.

Notes 1. I had to compromise between two competing goals—to put most of the Latin American tax reforms into the middle period, but to have first and last periods long enough to contain sufficient income-distribution data to make “before and after” assessments meaningful. 2. For direct and indirect tax revenues, the data come from World Development Indicators (World Bank 2004, 2007), and for personal income taxes from IMF, Government Finance Statistics Yearbook, various issues. Figures for direct tax revenues exclude those from state-owned resource companies. Apart from direct and indirect tax revenues, the denominator (total revenue) includes social security taxes, trade taxes, other taxes, fi nes, fees, rent, and income from state-owned properties. 3. These data are compiled from issues of the IMF’s Government Finance Statistics Yearbook, either taken directly from the data for general government or, where these figures were absent, derived by summing figures for subnational (where available) and central governments. Note that temporal comparisons can be made only for figures in italics. For others, different countries constitute the average—for example, of the seven Latin American countries in the average personal income-tax figure for the years before 1980, only three are part of the average after 1995. 4. Note that IMF figures for Denmark differ significantly from those given by the OECD. Part of the difference seems to be due to the treatment of social security contributions, which register about 2 of taxation for the OECD and about 4 of all revenue for the IMF, but most of it may be due to the exclusion of subnational governments in the IMF data. The “Anglo” pattern can be found also in South Africa and Zimbabwe. As shown in the figure, before 1991 Japan regularly obtained more than 60 of total revenue from direct taxes and less than 20 from indirect ones. This also had an Anglo connection in the reforms under the Occupation after the Shoup Mission (Kaizuka 1992). 5. On the latter point, see Bird 2003, citing Harberger 1962 and 1985. 6. Here, for want of data after 1994, I have instead used 1980–94 averages for four countries— Chile, Guatemala, Mexico, and Paraguay. 7. Th is supports the observation of Barreix, Roca, and Villela (2007, 62) that higher-income countries in the region collect somewhat more in such taxes than poorer ones.

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8. Gómez Sabaini (2005, 100) notes that their conclusions about direct taxation may be unduly pessimistic about personal income taxes because of the predominance of corporate taxation in the total of direct taxes in developing countries. 9. Income taxes reduced Gini coefficients by an estimated range from 0.00001 (Guatemala in 1993; Bahl, Martínez-Vásquez, and Wallace 1996) to .00197 (Peru in 2000; Haughton 2005). Valueadded taxes changed the Gini slightly in a negative (progressive) direction in Colombia and Guatemala, while the largest estimate of regressive effect (0.00088) derived also from Haughton 2005 on Peru (Lora 2007, 204). Lora (2007) and Gemmell and Morrissey (2003, 17) describe a bias in such estimates of incidence from the VAT because they measure it with respect to income rather than expenditures, which (because the rich earn more than they spend) makes the tax impact look more regressive. For my purposes, the point is moot because I am interested in the income effect and in comparing the incidence to that of income taxes. 10. The online appendix (details available on request) contains charts showing Gini coefficients derived from various income-distribution surveys alongside tax-reform indexes for fi fteen Latin American countries. The indexes are represented as thick lines, solid or dashed, with no markers. The surveys show up differently depending on their pa rameters: markers are larger for higherquality surveys (no lowest-quality results appear); subnational sampling frames have dashed lines; different defi nitions of income or consumption bear open or fi lled markers of various shapes (household consumption has unshaded “X” markers, for example—see the end of the online appendix for details). Estimates from differing survey pa rameters are not joined, but their differences can be assessed visually where they coincide in time. In some cases, where surveys of the same kind (continuous series with a line between markers) overlap or closely lag substantial changes in a taxreform index, we can assess the degree of influence directly from the chart. 11. Agosin et al. (2005, 81, 93–94) fi nd good support for this relationship in regressions on a ninety-five-country data set. However, given that they use simple cross-national WDI figures, the results might be affected by the high number of Latin American countries, with low tax/GDP ratios and high Ginis, in the middle-income range. The Gini here is also apparently after fiscal policy. 12. Moreover, outside Latin America, tax revenues after recent reforms usually declined (Keen and Simone 2004, table A2, 340–41). 13. Lora estimates that Colombia, Guatemala, and Mexico are particularly high (2007, table 6.9, 206). 14. Employer-withheld contributions to duties during that lapse have been counted as personal income tax in international compilations of Uruguayan taxes (Tuneu and Ghislandi 2006). 15. Studies also include Bulir (2001), which found that most of the distributional gains in disinflation came from reducing hyperinflation, with only meager gains from further reductions in price rises. 16. Th is brings me back to an old suggestion of Abba Lerner (1948) under the assumption of fully domestic public debt, as well as to Gregory Mankiw’s more recent “Savers-Spenders Theory of Fiscal Policy” (2000, 123). 17. Such a process actually took place in Guatemala in the spring of 2000. The tax reforms that resulted have fallen short of the goals set in the pact (Hernández Pico 2000). 18. Th is might be why the tax systems that are regarded as more successful can be found in places where the ISI project was never fully disassembled (Brazil) or where a neoliberal refounding was most complete, extending to the state itself (Chile).

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11

Are Coalitions Equally Important for Redistribution in Latin America? The Intervening Role of Welfare Regimes Juliana Martínez Franzoni and Koen Voorend

Introduction Does social policy help improve income distribution at all in Latin America? This question is crucial in the most unequal region of the world, as discussed in the introduction of this book. This chapter establishes the nature and magnitude of redistribution across welfare regimes in Latin America and discusses the role of distributional coalitions, that is, of actors actively engaged in increasing the role of a public and collective allocation of resources. For the purposes of this chapter, we define social policy as the constellation of key policies involved in social ser vices and transfers, primarily related to education, health care, and transfers such as social insurance and social assistance. The power-resource approach contends that to counterbalance elites and their powerful resources, progressive parties should create distributional coalitions with an extensive array of actors. Large, broad societal coalitions are more likely to emerge under the presence of universal rather than targeted social policy because they create incentives to get the middle class involved (Korpi and Palme 1998). In addition, Esping-Andersen (1990) shows for European and North American countries that such coalitions differ considerably across welfare regimes: redistribution reflects class alliances, leading to the central role of left-wing, social Christian, and liberal parties in social democracies, conservative welfare regimes, and liberal welfare regimes, respectively. Th is chapter received valuable insights from Merike Blofield, Fernando Filgueira, Juan Pablo Luna, James Mahon, Diego Sánchez-Ancochea, Jeremy Seekings, and participants at the Workshop on Politics and Inequal ity, University of Miami, Miami, May 16–17, 2008. A shorter version of this chapter was published in Social Policy and Administration in August 2009. We are particularly grateful to Jennifer Pribble for her inputs on elite and societal coalitions. Flaws that remain are ours.

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Societal coalitions need not be among classes per se, but can be among different organizations within the same class. Also, in the absence of broad societal coalitions, we may still find distribution and distributional coalitions, which, however, are top-down and elite based. In Latin America, during the past two decades, policy reforms under the so-called Washington Consensus promoted the privatization, decentralization, and targeting of social policies across policy sectors (Filgueira 1998; Filgueira et al., chapter 8 in this volume). In most countries, reforms involved the retrenchment of social policies for the middle class while welfare provision was extended to the poor, especially through social assistance, including conditional cash transfers (Seekings 2008). By excluding the middle class and the nonpoor, these programs effectively reached the poor, albeit through very basic ser vices such as primary health care or primary education. At the same time, economic restructuring led to a more polarized middle class (O’Donnell 1999), and these policies made it more difficult to form cross-class societal coalitions and thereby limited the scope of redistribution (Korpi and Palme 1998) because these targeted programs set apart beneficiaries with low political capital (Filgueira 1998). Economic deprivation makes collective mobilization difficult and inhibits the emergence of organized social claims (O’Donnell 1999). Public servants, salaried professionals, and other skilled workers were displaced by adjustment policies (Portes and Hoffman 2003). Many became self-employed, joined the growing ranks of the informal sector, experienced downward mobility, and lost “voice,” as Hirschman (1970) would say. A smaller portion of the middle class, such as senior professionals of multinational corporations, experienced upward mobility, isolated themselves in gated communities, and ceased to use many public goods. Social policy (or its absence) thus reshapes social structures and stratification, thereby setting the stage for crossclass coalitions to emerge and leading to path dependency (Pierson 1994). Following the power-resource argument, Filgueira argues that in Latin America, cross-class societal coalitions are currently necessary to counterbalance state retrenchment in social policy, but they are very difficult to establish. On the one hand, distributional coalitions should include some segment of the middle class so that their “voice” and political capital can contribute to the broader distributional process for improved coverage and quality of services. On the other hand, the fact that targeted policies have replaced collective goods and thereby have excluded the middle class and its “voice” from mainstream social policy has engendered regressive social policies that are difficult to overcome (Filgueira 1998). In short, if the literature for the OECD countries is correct in saying that societal cross-class distributional coalitions increase the potential or opportunities for redistribution, the future of redistribution looks grim in Latin America, which may be caught up in a vicious circle of pro-poor but minimalist policies on redistribution.

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This chapter explores the role and nature of coalitions in countries with sharply contrasting social policies. The next section sets the stage for this exploration by outlining a typology for the very complex reality of Latin American welfare regimes. The third section looks at the amount and effectiveness of social policy of three emblematic cases, Chile, Costa Rica, and El Salvador, while the fourth section tries to explain the different redistribution outcomes. We present our conclusions in the final section.

Welfare Regimes in Latin America In developing countries, the family and female unpaid work have historically played a major role in providing for people’s well-being, whether poor or nonpoor (Gough and Wood 2004). As late as 1990, “only 30 of the world’s elderly were covered by formal arrangements, and only 40 of the world’s working population participated in any formal arrangements for their future old age” (Seekings 2008, 25). For this reason, Esping-Andersen’s (1990) typology, focused on OECD countries, failed to address the role of family or kin in caring for poor people. In a region where social policies are often weak, they often play a marginal role in redistribution. Social policy plays a role within the welfare regime, which we define as the broader constellation of interactions among domestic and international markets, families, and collective allocation of resources. The welfare regime may be state led, but it may also be managed by community and international organizations. In fact, research suggests that welfare regimes in the global South are all largely informal, with labor markets that are unable to provide sufficient formal jobs, coupled with weak public policies. In this reality, the distinction between market, public, and family-led allocation of resources becomes unclear. This is certainly true for Latin America, where a large proportion of the population is unable to commodify its labor, citizens either self-employ in the informal sector or emigrate to earn income, public policies are weak or nonexistent, and families and women’s unpaid work play a major role in survival strategies. At the same time, there are qualitative differences in the region in how markets, public policies, and unpaid work combine for risk management. That is, countries differ greatly in three dimensions: the extent to which they manage to commodifiy their labor force within their borders, to decommodify people’s well-being through social policies that untangle purchasing power from risk management, and to defamiliarize or decouple welfare from unpaid female work (Martínez Franzoni 2008c). As expected, inequality, the primary focus of this book, shows important variation across welfare regimes. Using data for these three dimensions of the welfare regime, Martínez Franzoni (2008c) has created a typology to identify patterns that help understand

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the complex reality of Latin America. She finds three types of welfare regimes, depending on whether markets (e.g., Chile), social policy (e.g., Costa Rica), or families (e.g., El Salvador) are the primary engines in managing social risks. She refers to these three types as market-productivist, state-protectionist, and familialistic welfare regimes, which we have later renamed market, states, and familial to simplify the tags and make them clearer. Figure 11.1 outlines her typology. As figure 11.1 shows, there is cross-national variation in how effective domestic labor markets are at absorbing and remunerating the labor force (upper-left cells). Countries also vary in the strength and role of social policies (upper-right cells). Finally, they vary in the relative importance of the traditional nuclear family, with a male breadwinner and a female caregiver (lower cells). Female income providers, extended households, and/or female-headed households are dispersed across the entire region. However, their relative importance separates countries with familial welfare regimes from those with market and state welfare regimes. Table 11.1 summarizes key features for risk management under each type of Latin American welfare regime.

Low or zero decommodification, very dependent on international cooperation

High transnational commodification of the labor force with low incomes El Salvador

High familialization with low sexual division of paid work

High commodification of the domestic labor force with medium incomes

High decommodification with focus on middleclass and formal workers Costa Rica

Low familialization with high sexual division of paid work

High decommodification with focus on sectors with limited resources

High commodification of the domestic labor force with high incomes Chile

Low familialization with high sexual division of paid work

Markets States Families

fig. 11.1 Latin American welfare regimes primarily driven by markets, states, or families.

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Table 11.1 Latin American welfare regimes according to primary rationale by dimensions Risk management centrally revolving around Dimensions

States

Markets

Families

State capacities Primary goal of social policy Decommodification

Strong Social protection

Strong Human capital for labor productivity High and mostly targeted at the poor or lowincome groups High

Weak Social assistance

Markets

Families, unpaid female work Multitask

High and mostly linked to formal wage earning labor Income inequality Uneven (most equal and most unequal coexist) Primary pillar for State and public risk management policies Role of unpaid female As state work counterpart Human development High Countries Brazil, Costa Rica, Panama, Mexico, and Uruguay

Low and across the board

High

As market counterpart High Medium and low Argentina and Chile Subgroup a: Colombia, Ecuador, El Salvador, Guatemala, Peru, and Dominican Republic; subgroup b: Bolivia, Honduras, Nicaragua, and Paraguay

Source: Martínez Franzoni 2008c (includes a detailed description of the thirty-eight indicators used and the statistical analysis applied).

In both state-protectionist and market-productivist welfare regimes, state capacities are strong, but they differ in the primary goal of social policy. The first aims at social protection through high and universal decommodification, while the second aims at enhancing human capital for labor productivity, mainly through targeted social programs. In the informal-familial welfare regime, state capacities are weak and levels of decommodification are low. Families, and specifically unpaid female labor, become the central pillar for risk management. Levels of income inequality are quite high across all three welfare regimes. Variance, however, is higher in state-protectionist countries; Uruguay and Costa Rica have the lowest inequalities in the region, while Brazil has the highest. In both market-productivist and informalfamilial countries, inequality tends to be homogeneously high. Thus fi ndings

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indicate that decommodification is key to overcome inequal ity successfully, but also that not just any kind of decommodification will do the trick. As citizens increasingly deploy private and family-led survival strategies coupled with little or no experience or expectations regarding the state’s role in their well-being, it is less likely that societal distributional coalitions will emerge. Th is premise implies that distributional coalitions should be less likely to exist in El Salvador than in Chile or Costa Rica. In addition, unlike Costa Rica, Chile has stressed the role of targeted versus universal policies, and the upper class and an ever-larger portion of the middle class rely on the market rather than on public transfers and ser vices. Therefore, we would also expect distributional coalitions to be stronger in Costa Rica than in Chile. Our hypotheses are consistent with findings presented by Blofield and Luna (chapter 5 in this volume), although they focus on partisan representation rather than on societal coalitions. They find that more equal countries tend to have higher preferences for redistribution. To the contrary, and ironically, more unequal societies stand a smaller chance of effectively politicizing the issue of inequality.

Do Social Policy Regimes and Distribution Make a Difference? How important are social policies in mitigating inequality in Latin America, and to what extent does their existence depend on distributional coalitions? To answer these two questions, we focus on Costa Rica, Chile, and El Salvador, emblematic of the three types of welfare regimes discussed earlier. By focusing on these contrasting cases, we seek to establish what is shared and what is distinct across the region, first, in redistributive outcomes, and second, in the role that coalitions play in these outcomes. In this section, we focus on the magnitude and nature of social expenditures in these countries. The good news here is that in all three countries, social expenditures indeed manage to reduce inequality. However, there are marked differences in the magnitude of the effect, in the principal logic behind social expenditure, and in the range of the population covered. Income Distribution

To analyze the impact of social policy on distribution, we must first establish primary income distribution, that is, distribution before the intervention of tax and social policies. In table 11.2, the primary income distribution of the three countries is shown by income-distribution quintiles, from the poorest 20 to the wealthiest 20.

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Table 11.2 Primary (monetary) income-distribution groups by quintiles

Country

Year

I (poorest %)

Chile Costa Rica El Salvador

  

  

II

III

  

  

IV

V (richest %)

Total (%)

  

  

  

Source: CEPAL (2005).

Contrary to what one might expect, table 11.2 indicates that primary distribution is fairly similar across countries: in Costa Rica, the poorest 60 of the population receives 27 of national income, while in Chile and El Salvador, it receives 24 (CEPAL 2005). According to CEPAL (2005), income distribution in Chile remained largely unchanged between 1996 and 2003. However, in Costa Rica, between 1986 and 2000, income distribution worsened: the richest 20 of the population gained 10 of the total national income, while the rest of the population lost either 1 (quintile 1) or 3 (quintiles 2, 3, and 4). The working and middle classes were the primary losers during this period. In El Salvador, income distribution slightly improved. However, this improvement was largely due to emigration and remittances. It is noteworthy that the 2007 census data established that the Salvadorian population is much smaller (by about one million) than expected because of emigration (PNUD 2008). We next investigate secondary distribution in more detail in order to establish whether, and to what extent, social policies help decrease inequality in the three countries. Secondary Distribution: Effect, Allocation Criteria, and Weight

Here we examine whether secondary distribution shows cross-national variation as a result of tax systems and social policies. As we show later, the remarkably low inequality found in Costa Rica (pointed out in chapter 1 of this volume) reflects the role played by social policy. To assess how social policy reshapes inequality set by primary distribution, we consider three criteria: effects on income distribution, allocation criteria, and relative weight of social policy for total income. Table 11.3 summarizes the primary findings, which we break down and discuss here. Regrettably, in some cases we face serious limitations in data, namely, the exclusion of social security. When social security data are unavailable for analysis, this fact is mentioned. Chilean and Costa Rican social policies have relatively large distribution effects, although under different allocation criteria and a higher relative weight

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in total income in Costa Rica than in Chile. In El Salvador, under semitargeted policies, redistribution effects are relatively small, as is the importance of social income in total income. Effects on Income Distribution

To address the effects of redistribution, we compare inequality before and after social transfers and ser vices. Posttransfer measures consolidate both monetary and social income—that is, transfers such as pensions and in-kind ser vices such as education or health care. The good news is that in two of the three countries, social spending improves income distribution (see figure 11.2). However, it does so in varying degrees: social expenditures improve income distribution much more in Chile and in Costa Rica than in in El Salvador. Gini coefficients go from 0.594 to 0.543 in Chile and from 0.542 to 0.495 in Costa Rica. In El Salvador, contrastingly, social spending seems to have little effect on income distribution; the Gini coefficient remains almost unchanged at 0.46 (CEPAL 2009). Since Esping-Andersen’s publication (1990) on the three worlds of welfare capitalism, analysis of welfare regimes has shifted from a focus on the amount of resources dedicated to social expenditures to the eligibility criteria for such resources. This focus makes sense when the amount spent on social policy is

Table 11.3 Three worlds of redistribution in Latin America Country

Redistribution effects

Primary allocation criteria

Relative weight in total income

Chile Costa Rica El Salvador

High High Low

Targeted Universal Semitargeted

Intermediate High Low

Source: Authors’ elaboration.

0.65 0.6 Chile

0.55 0.5

Costa Rica

0.45

El Salvador

0.4 Gini primary income

Gini total income

fig. 11.2 Distribution from primary to total income, Chile, Costa Rica, and El Salvador. Source: CEPAL (2007).

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relatively homogeneous across countries and plays a key role in people’s overall income (Filgueira 1998). However, neither condition applies in Latin America, where social expenditure per capita is negligible in many cases but variable across the region, ranging from slightly more than US$60 per year in Nicaragua (a figure below any reasonable amount to affect inequality) to more than US$1,000 in Argentina. In Latin America, therefore, it is crucial to link redistributive effects to the level of social expenditure, both in fiscal efforts and per capita social expenditures. In Chile, from 1990 to 2010, the government was in the hands of a centerleft coalition, the Coalition of Parties for Democracy, first with presidents from the Christian Democratic Party and later the Socialist Party. The opposition, in turn, was in the hands of the Right. When this coalition came to power in 1990, it inherited a social policy regime that had been highly privatized under Pinochet’s dictatorship. Although the rationale of post-1990 reforms in Chile was based on a strong postdictatorship consensus that the market was to remain more or less untouched, there have been various important transformations of the liberalized social policy regime since. The country expanded social expenditures most drastically during the second half of the 1990s. Since then they have stagnated (CEPAL 2007), although recent developments under President Michelle Bachelet (2006–10) seem to indicate another increase over the 2006–10 period (CEPAL 2009). In contrast, in Costa Rica two major parties (which operated under a twoparty system) alternated in government until 2002. The social Christian Partido Unidad Social Cristiana (PUSC) and the social democratic Partido Liberación Nacional (PLN) ruled as part of a strong political pact in economic policy, but less so in social policy. Social spending increased during the PLN administrations and fell during the PUSC administrations, which unsuccessfully sought to privatize and liberalize social policy to move toward a more Chilean-style social policy regime. The reforms that did go through predominantly concerned restoring the precrisis social policies that existed before 1980 rather than aiming for radical changes. This continuity in social policy—albeit with some additions and changes—clearly contrasts with the structural economic transformations that the country experienced during the same period. In El Salvador, the government has been in the hands of the right-wing Nationalist Republican Alliance (Spanish acronym ARENA) since before the peace accords in 1992 until very recently. During this time, the government faced strong political opposition from the leftist Farabundo Marti Front for National Liberation (Spanish initialism FMLN). The FMLN consists of former guerrillas who transformed into a political party and first participated in elections in 1994. The reforms in El Salvador’s social policy regime have been marked by the end of the civil war, the peace accords, and the transformation of the guerrilla movement into the main opposition force in the country. In

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2001, El Salvador suffered two major earthquakes that demanded resource mobilization for reconstruction and were reflected in an increased proportion of GDP devoted to social expenditures, primarily to restore previous infrastructure. Despite this temporary and slight increase, the percentage of GDP devoted to social policy in El Salvador is clearly insufficient: the amount spent on the country’s entire social policy is only slightly more than what Chile and Costa Rica spend on just one policy sector (such as health care). Unfortunately, the data presented in this chapter do not include expenditures under the conditional cash-transfer program Red Solidaria launched in 2005. A familialistic welfare regime with residual social policy, El Salvador lags far behind Chile and Costa Rica, although in recent years the gap seems to have reduced somewhat, as shown in figure 11.3. In fiscal priority, social expenditures in Chile and Costa Rica represent between 65 and 68 of total public expenditure. These percentages set them clearly apart from El Salvador, where social expenditure reaches only 40 of total public expenditure. This is shown in figure 11.4. Therefore, in Chile and Costa Rica, social policy plays a much more important role in dealing with

Percentage of GDP

25 20 15 Chile

10 5

Costa Rica 2008

2007

2006

2005

2003

2004

2002

2001

2000

1999

1997

1998

1996

1994

1995

1993

1992

1991

1990

0

El Salvador

Percentage of total public expenditure

fig. 11.3 Public social expenditure (including social security) as a percentage of GDP, Chile, Costa Rica, and El Salvador, 1990–2008. Source: CEPAL (2007).

80 70 60 50 40 30 20 10 0

Chile Costa Rica El Salvador 90 991 992 993 994 995 996 997 998 999 000 001 003 004 2 2 2 2 1 1 1 1 1 1 1 1 1

19

fig. 11.4 Public social expenditure (including social security) as a percentage of total public expenditure, Chile, Costa Rica, and El Salvador, 1990–2004. Source: CEPAL (2007).

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social risks and providing welfare for the 60 and 80 lowest-income groups of the population than in El Salvador. That said, in all three countries the relative weight of social expenditures increased in the period under consideration (by 8 in Chile; by 7 in El Salvador; and by 2 in Costa Rica, which in 1991 already had higher social expenditures as a percentage of total expenditures than Chile). In El Salvador, however, this increase of 7 should not be overestimated, given that in the early 1990s, the relative weight of social expenditures was extremely low. Although the 7 increase does imply some distributional change, social spending is still far from sufficient to meet social demands. In Chile and Costa Rica, social expenditures are an important source of social income for between 60 and 80 of the population. Although the scope of Costa Rican social income is somewhat broader than Chile’s, in both countries the reach of social policy is considerably larger than in El Salvador. In El Salvador, however, the low levels of social spending and the important role of family strategies in the provision of welfare and access to goods and services, such as family remittances, make it difficult to foster conditions for broad distributional coalitions. Survival strategies are largely private and family based. We would therefore expect conditions to be more conducive to the formation of distributional coalitions in Chile and in Costa Rica than in El Salvador. Allocation Criteria for Social Expenditures

Does social spending primarily go to the poor, to middle-income families, or to the rich? Learning how social spending is allocated provides us with a proxy measure for addressing the redistribution effects of social policy. Available data do not allow us to break down monetary and social income in order to assess income distribution before and after social spending is allocated. Nonetheless, they do provide insight into the extent to which social expenditures redistribute resources from higher-income groups to medium- and lowerincome groups. Data also do not include social security data, which are available for Costa Rica for both years under review but are only partially available for Chile (2003) and unavailable for El Salvador. As shown earlier, the type of welfare system does not have differentiated effects on inequality: for both Chile, with a market-productivist emphasis, and Costa Rica, with a state-protectionist emphasis, we found similar results. However, these countries do differ in the allocation of social spending and therefore who in the social structure (as measured by income quintiles) is affected by that spending. As shown in table 11.4, which shows the distribution of social spending per quintile, social spending in Costa Rica has an effect on a wider range of the population than in Chile. As table 11.4 indicates, in Chile the allocation of social spending was rather stable between 1996 and 2003. Also, given the central role of targeted policies

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Table 11.4 Allocation criteria by income groups and country

Country Chile Costa Rica El Salvadora

Year

I (poorest %)

II

III

    

. . . . .

. . . . .

.    

IV

V (richest %)

Total (%)

. . . . .

. . . . .

    

Source: CEPAL (2005). a

Because of lack of data, these percentages refer to health care only.

in Chile’s social policy regime, a higher percentage of social spending is targeted to low-income groups and indeed goes to the poorest quintiles, a pattern that the data suggest intensified between 2003 and 2006. In the richest quintile, individuals access only a very small share of social expenditures (7). Quintiles IV and III receive a share of social expenditure closer to 20, which does not change primary distribution, but social expenditure becomes increasingly redistributive in quintiles II and I. If it is true that redistribution depends on political power, which in turn relies on social demands—or at least social support by a more or less broad set of income groups and social classes—the data suggest that such redistribution should indeed be narrower in Chile than in Costa Rica. Costa Rica shows important change over time if we compare 2000 with 1986 data, particularly among the group with highest income (quintile V). However, if we compare 2000 with 2004 from a different data source, there are hardly any changes in the allocation of social spending. According to 2000 data, the allocation of social expenditures among income groups is fairly uniform, including among the group with highest income. From these data, one would therefore expect conditions to be more conducive to broader cross-class coalitions in Costa Rica than in Chile and El Salvador. In Costa Rican social expenditure, collective pension funds play a central role, while they are absent or marginal in Chile and in El Salvador, given their privatized pension systems. Therefore, a comparison of the allocation of social expenditures with and without social insurance is useful. If we consider social insurance (i.e., contributory pensions) for Chile in 1996, social policy is seen to be much less progressive. With social insurance, the richest quintile receives more social expenditures (30 as opposed to 6.8), and the lowest quintile receives significantly less (16 as opposed to 33). Although El Salvador has only very basic social ser vices, it does allocate these resources relatively evenly across income groups. Social expenditure is concentrated among the groups with lowest income (more than in Costa Rica but less than in Chile) but also reaches middle-income groups. However, here

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the amount of social expenditure becomes an important indicator, given that El Salvador’s social expenditure lags far behind that of Chile and Costa Rica. Thus, given the low quantity of social expenditure, it might be too strong to claim that middle-income groups have vested interests in social ser vices. However, they can be expected to have certain interests in specific policy sectors, particularly concerning health-care ser vices provided under social insurance. Degrees of commodification of health-care ser vices, largely pushed by higher-income groups, vary considerably across countries: in Costa Rica, outof-pocket private expenditures reach 30 of public expenditures, while in El Salvador and Chile, these are 1.2 times the amount of public expenditures (World Bank 2009), a striking figure if we consider that the Latin American average is 50.7 (Márquez Ayala 2007). In short, if distributional coalitions were mechanically drawn from the allocation of social expenditures, conditions for such coalitions to emerge should be less favorable in Chile, more favorable in Costa Rica, and between these two extremes in El Salvador. Weight of Social Expenditures Across Income Groups

To establish the potential of social expenditure to lead to the formation of societal distributional coalitions, it is also important to take into account the relative weight of social income in an individual’s total income. Table 11.5 lays out the data for the three countries. As table 11.5 indicates, among the lowest income quintile (I), social income amounts to 50 of total income in Costa Rica, 38 in Chile, and only 28 in El Salvador. Thus, despite the stronger role of targeted policies in Chile, social income has a smaller weight in total income among the poorest in Chile than in Costa Rica. Among the wealthiest quintile(s), on the other hand, social income as a part of total income is essentially irrelevant in El Salvador, almost irrelevant in Chile, and only slightly relevant in Costa Rica. In fact, if we consider the 60 of the population with highest incomes in El Salvador, social income matters very little indeed (or not at all) to people’s income. Table 11.5

Relative weight of social expenditures in total income across income groups

Country

Year

I (poorest %)

Chile Costa Rica El Salvador

  

  

Source: CEPAL (2005).

II

III

IV

V (richest %)

  

  

  

  

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In Chile, and even more in Costa Rica, this statement applies only to the richest 20 of the population. Thus, if social spending were to be an indicator of the possibility and breadth of coalition formation and distributional agendas, Chile, Costa Rica, and El Salvador would show very distinct scenarios: the scope for coalitions among income groups would be largest and broadest in Costa Rica and lowest and narrowest in El Salvador.

Policy Legacies: Actors and Coalitions Behind Current Social Policy Regimes Since the early 1990s, Chile, Costa Rica, and El Salvador have experienced similar pressures for social policy reforms that in theory should lead toward convergence in social expenditure and its impacts on distribution. However, the distributional outcomes attained in these countries are, as we have seen, very different. How can we explain these differences? Historical trajectories and policy legacies filter international pressures for policy reform and, along with national policy paradigms, shape actual reforms and policy outcomes. Here we present a short analysis of the combination of factors that shape actual social policy in the three countries. This preliminary and exploratory analysis is summarized in table 11.6. Table 11.6 shows the extent of social policy reform during the 1980s and 1990s, the role of the social policy regime in promoting redistribution, and the role of coalitions therein. Here we show that Chilean policy formation has been predominantly top-down and technocratic, as well as successful in transforming various policy measures inherited from the Pinochet dictatorship. In contrast, Costa Rican policy formation has been mainly bottom-up during this time period, generally defensive of policy legacies rather than transformative, and mostly successful in maintaining these legacies. El Salvador’s policy formation has been mostly top-down, a result of a combination of partisan-based and technocratic reforms and with more or less unsuccessful vetoes from below, depending on the policy sector in question. Costa Rica: Broad Defensive Distributional Coalitions

In Costa Rica, the last critical juncture took place during the early 1980s when the country faced an economic crisis unprecedented since 1929. The state responded to this crisis by reducing levels of investment and available resources instead of privatizing or officially reducing coverage of ser vices. It deployed two strategies; on the one hand, it maintained existing social policies; on the other, it created compensatory temporary programs. Besides recovery tools and wage supplements, this temporary plan included unemployment

Radically reformed

Weakened

Chile

El Salvador

Source: Authors’ elaboration.

Scarcely reformed

During the s

Costa Rica

Country

Deepening liberal reforms

Buffering previous liberal reforms

Tied between pro- and antiliberal reforms; inertia

Prevailing rationale during the s

Social policy regime

Small

Large

Large

() Amount of resources allocated

Low and narrowest

High and narrower

High and broadest

() Relative importance of social expenditures across income groups

Highly uneven allocation, targeted to lower quintiles Somewhat uneven allocation, targeted to lower quintiles

Even allocation among quintiles

() Allocation of social expenditures across income groups

Role of the social policy regime in promoting redistribution

Table 11.6 Role of social policy in redistribution and of distributional coalitions by country and dimensions

Sector-dependent (technocratic, mostly transformative; coalitions mostly defensive)

Yes; across sectors, mostly defensive or transformative of policy instruments No; mostly technocratic, top-down changes

Have there been distributional coalitions?

Balance

362 taxation and social policies

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benefits, temporary food aid, and productive aid programs (e.g., soft loans and inputs) for the poor (Villasuso 1992). All in all, the crisis did not transform the country’s social policy architecture, which was based on four primary pillars of universal programs (education, health, pensions, and housing) and targeted programs funded by Fondo de Desarrollo Social y Asignaciones Familiares (Castro Méndez and Martínez Franzoni forthcoming). Initially, social spending suffered a downward adjustment equivalent to half of the downward adjustment of the rest of public policy (5 and 10, respectively). Later, however, even in years of economic growth, social spending was subject to downward adjustments, often larger than those for overall public spending (Trejos 1993). Altogether, overall public social spending now is 48 higher than it was before the economic crisis. However, if it is measured in per capita social spending, it has not yet reached precrisis levels. Also, given that institutional changes typically involved aggregation rather than elimination of programs, more work had to be done with fewer resources, and the deterioration or stagnation of investment was only partially offset by external financing. As a result, the quality of education and healthcare ser vices decreased during the 1990s (Trejos 2007, 2008; Martínez Franzoni 2008a), shown, for example, in the significant increase in the number of dropouts in secondary education. There have not been any institutional reforms in education, but there have been various efforts to expand and improve public education ser vices (such as adding computer science and English to the school curriculum) and coverage (particularly in secondary education). Although there has been relatively little pressure for structural reforms, there have been important conflicts with the overwhelmingly public workforce in education. For example, teachers’ unions have been primarily concerned with working conditions and clashed over the increase of the academic year to two hundred school days in 1997. In the health-care sector, a technocratic, top-down reform began in the early 1990s, but it generated union opposition because of fears of privatization. However, although the government increased the role of private ser vice provision, service delivery remained basically public, and the measures were mainly managerial. This reform has had important positive results in access, in particular for the popular sectors, although it has been much less successful in reaching the middle class and in improving the quality of health-care services. In the same period, the relative weight of private health care increased, along with conflicts of interest between public and private practice (Martínez Franzoni 2005). The most spectacular of these conflicts led to jail sentences for two former presidents for embezzlement, one of them from social security funds (Seligson and Martínez Franzoni 2009). In pensions, two major social policy reforms were carried out in 2000 and 2005 (Martínez Franzoni 2008a). Business sectors, unions, and government

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all contributed to the reforms. The creation of a multipillar pension system was the primary change, although a collective fund remained as the primary pillar. The reform introduced an individual capitalization fund, albeit a moderate version, both in contributions and funding. Unions successfully demanded that social insurance be mandated to reach informal workers as part of an agenda to ensure the fi nancial sustainability of the collective capitalization regime. Both in 2000 and in 2005, unions and other civil society organizations (e.g., part of the cooperative movement) successfully presented innovative proposals aimed at maintaining the architecture of the collective regime, albeit with changes in the methods and ser vices (Castro Méndez 2000; Martínez Franzoni 2008a). This role that unions and the business sector played in the 2000 and 2005 reforms is quite unusual and is not found in the other policy sectors, despite the fact that health-care insurance, for example, is also run by government, business, and unions (Martínez Franzoni 2008b). Unions did play a key role in policy advocacy, particularly in defending the social health-care and educational policies that were in place before structural adjustment. However, the lack of freedom of association in the private sector has led unions to draw their constituency primarily from state employees. Unionized workers in the private sector account for less than 2 of the economically active population, including the self-employed (Castro Méndez 2000). The weak position of unions by itself does not explain why pro-poor coalitions—and thus antiuniversal policies—did not emerge in the wake of the crisis. However, the strong societal consensus about the central role of social policies remained. Thus, unlike most other countries in the region, the government maintained and expanded both targeted and universal policies, both of which together have been shown to be most effective in reaching the poor. In fact, as Trejos (2006) has shown, for the poorest 20 of the population, universal social spending plays a larger role than targeted social spending. In short, Costa Rica has a social policy regime that—despite the economic crisis of the 1980s—has basically maintained its precrisis architecture. Societal distributional coalitions between classes have been strong and have mainly operated to defend the social policy regime rather than to reform it. Chile: Technocratic and Transformative Policy Reforms

Since the early 1990s, Chilean policy makers have pursued “reforms of the reforms” inherited from the military dictatorship under Pinochet. On the one hand, these reforms have increased universal access to social services. On the other hand, measures have sought to avoid affecting the role of private actors in

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running social services, whether education, health care, or pensions, in sharp contrast to Costa Rican social policy, which was expanded largely on the basis of payroll taxes. In the health-care sector, President Ricardo Lagos (2000–2006) created the Universal Access to Guaranteed Rights (AUGE) plan, which aimed at better access, improved quality, and shorter waiting times in the public sector by establishing a minimum coverage plan. This “involved a laborious process of negotiation both among sectors of the Concertación parties and between the center-left coalition and the opposition, lasting from 2002 to 2004” (Pribble and Huber 2008, 8). The law guaranteed universal coverage of fifty-six illnesses by 2007 (Chilean Government 2010). The reform specifies a timeline and includes a pledge by the state to cover the cost of treatment of these illnesses in the private sector if the public sector is incapable of offering this care (Artaza 2008). This explains the limited coverage in light of containing costs and pressure on the state’s budget. AUGE has had a positive impact especially on lowerincome groups, who use the public system more than higher-income groups (Superintendencia de Salud de Chile 2005), and has likely helped reduce poverty levels (Pribble 2008; Drago 2006). According to Pribble and Huber, “The AUGE reform was largely driven by partisan elites, and portions of it clearly reflect the preferences of the market-friendly sector of the Socialist Party, which prioritizes fiscal discipline and macroeconomic stability” (2008, 21). Regarding social assistance, Chile Solidario, an integral program targeted at Chile’s poor that consists of a conditional cash transfer and a program called Programa Puente that provides preferential access to other sectors of social policy, was implemented in 2004 by President Lagos as well. This program provides income and psychosocial support to families living in extreme poverty, as well as preferential access to other public social policies (Henríquez and Reca 2005, 120; Chile Solidario 2004). It was a top-down initiative, and there was no consultation with base organizations. President Bachelet (2006–10) continued the program and expanded coverage and the network of social ser vices (Artaza 2008). The process has been highly technical in character and has sought to avoid political influences from parties (Pribble and Huber 2008, 24). Thus policy formation has been top-down; it has little to do with societal coalitions, either as an explanatory factor in the reform or as an effect of the program. In education, the (slow and ongoing) reform process of Pinochet’s education law (Ley Orgánica Constitucional de Enseñanza) began after student protests that took place in April and May 2006. The so-called march of the Penguins, consisting of thousands of students, demanded an end to the decentralized system of school administration, which was highly unequal (Mardones 2007; Raczynski 2008). In this case, a nontraditional, unexpected

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actor triggered policy reform from the bottom up and opened the agenda for sectoral reform. Policy formation, however, has been top-down, to the extent that the student body that pressured for reform became so frustrated with the process that its members left the negotiation table. According to Pribble and Huber, “The more traditional-statist sectors of the party [Partido Socialista] favored a reform that explicitly supported the public municipal schools, but this was rejected for a system that funds poor students regardless of the school they attend. As a result, the reform will provide funds to private subsidized schools as well as strictly public municipal schools. This aspect of the reform is in opposition to the preferences voiced by the teachers’ unions, student organizations, and other base groups” (2008, 23). Despite this social opposition, the reform (Ley General de Educación) was approved with the support of right- and left-wing legislators in June 2008 (Agencia de Información Frat Tito para América Latina 2008). Finally, a pension reform aimed at coping with the extremely low coverage was approved and went into effect during the first half of 2008. This reform was also a top-down process, although civil society was selectively invited to send in proposals to be considered as part of the reform (Consejo Asesor Presidencial para la Reforma Previsional 2006). Formally, before the reform, there was a minimum pension for those without contributory coverage. However, as in El Salvador, 240 monthly contributions were required to be eligible, a number difficult to achieve even in a labor market considerably less informal than El Salvador’s. “Since such a long contribution record is beyond the reach of many Chilean workers, this benefit is unattainable for a large share of individuals. Similarly, the social assistance pension, which is paid to the elderly poor, is also unobtainable for some individuals because they do not qualify for the benefit according to the country’s means test” (Consejo Asesor Presidencial para la Reforma Previsional 2006, 17–18). Among the measures in the reform is the introduction of a universal pillar into the privatized system. This pillar will replace both existing mechanisms and will fund old-age, disability, and survivor benefits to individuals currently without coverage. This basic universal pension will be available to the bottom 60 of the income distribution. In addition, informal workers will have the same benefits as formal workers with a contract (i.e., family allowances and work injury protection) (Pribble and Huber 2008). In summary, Chilean social policy was deeply reformed during the military dictatorship of the 1980s. Since democratization in 1990, various policy measures have changed previous reforms, specifically to enlarge the role of public resources to decommodify risk management, but without substantially altering the central role of markets and the private sector. Policy formation has been markedly top-down and has revolved around technocratic

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elites linked to political parties in office, but has also been quite powerful on its own terms. El Salvador: Weak Coalitions, Contingent on Policy Sectors, and After a Mix of Restoration and Transformation

Since 1992, when the peace accords were signed, there has been significant policy change in El Salvador. However, it is important to note that the political and socioeconomic context differs vastly from the contexts in Chile and in Costa Rica. First, the neoliberal economic and social reforms that took place during the 1990s were embedded in the context of post-civil-war reconstruction. Second, the point of departure was a residual, exclusionary social policy regime with extremely low coverage and clearly insufficient levels of social spending. Furthermore, the formal labor market is much less capable of absorbing labor than in Chile or Costa Rica, while the rate of self-employment is more than double and emigration is a primary source of income, both for families and for the country as a whole. In addition, trade unions are forbidden among public servants and thus are limited to very specific sectors such as autonomous state institutions (Almeida and Delgado 2008). Educational reforms were launched in the first half of the 1990s during the post-civil-war “honeymoon” period between the right-wing ARENA and the left-wing FMLN (Gallardo 2008). The reform promoted decentralization, but in a very unique context: the former guerillas, now a political party, demanded that the large number of schools and teachers located in previously guerrilla-controlled regions be integrated into the formal education system. The reform took place after an agreement between negotiators for the FMLN and ARENA and was supported by teachers’ unions, closely related to the left-wing political party (Gallardo 2008). Although this reform was negotiated among elites, it had a larger, societal support base and was also bipartisan, involving key leaders from both the FMLN and ARENA. Once this specific postwar negotiation was left behind, subsequent measures maintained this bipartisan support but followed a top-down rationale, except when more corporative issues such as wages and contracts were addressed. In contrast, pension reforms were carried out unilaterally by the government in the late 1990s without the support of the political opposition, but with no strong social opposition either. With the 1996 reform of the pension system, pensions went from a collective pay-as-you-go system to one based on private individual savings and accounts. Because the former system benefited just a few, one of the arguments that drew favorable public opinion was that the new system would increase coverage and opportunities for those excluded from all social protection. However, with the very large informal sector,

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the proportion of the population actually contributing has up to now remained as low as before (Argueta 2007). Moreover, access to the minimum pension is among the most restricted in Latin America because of the requirement of 240 monthly quotas for eligibility (Mesa-Lago 2003). Meanwhile, public debt to private insurance businesses is fairly large because people who switched from the public sector to private insurance at some point must also take their savings with them, and thus social expenditures are more regressive than before. Therefore, the reform, instead of extending coverage, has actually reduced it. Additionally, the reform forced the state to transfer a very large amount of resources to private administrators of pension funds (Gallardo 2008), and the government is predicted to face major public debt challenges in 2011. In fact, it is already experiencing pressure on other social policy sectors (such as education and health) (Martínez 2008). In the health-care sector, an overarching sectoral reform has had many setbacks. During the first half of the 1990s, several organizations from different ideological backgrounds carried out analyses of the system. During the second half of the 1990s, a national board that encompassed a fairly heterogeneous set of interests and viewpoints came to an agreement. Although this agreement was still somewhat vague, it provided a reasonable framework for strengthening public ser vices, both in funding and in provision. However, very unexpectedly, and contrary to what had been agreed on by the different sectors, President Francisco Flores (1999–2004) unilaterally sent a proposal to Congress with a much more neoliberal bent than was anticipated. As a result of the closed and top-down nature of this proposal (Homedes et al. 2000), a coalition of actors opposing the privatization of funding and provision of health ser vices took to the streets. Medical unions and other professional health-care organizations were the primary actors in the coalition but were strongly supported by women’s organizations, users, and citizens, as became evident in the impressively large demonstrations, known as the marchas blancas (Almeida and Delgado 2008). The coalition was successful in opening up a space for negotiations between distinct actors—for example, business, doctors, and human resource trainers—and several general agreements were reached (with the exception of funding and ser vice delivery). Eventually, Flores’s reform was vetoed, and a new national board was established. However, the confrontation between pro-state and pro-market supporters following Flores’s initiative drained much of the previous political and social energy to negotiate reform that had existed before Flores’s unexpected proposal. A golden opportunity for a more consensual reform had unfortunately been missed (Choussy 2008). Since then, the primary source of disagreement has been whether to unify and integrate private subsystems, public programs, and social security or to privatize a greater range of ser vices.

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A new law that created some conditions to unify ser vices was approved in late 2007. However, this law was opposed by the FMLN and health-care unions, who contend that the reform opens doors to further privatization (Menjívar 2008; Orellana 2008). Overall, health-care alliances among unions and users have been important in delaying the pace of reforms. This coalition has been mostly defensive, driven by an antiprivatization agenda. In the area of social assistance, the conditional cash-transfer program Red Solidaria was established in 2005. Like the pension reform, it was top-down, but in contrast to the pension reform, this program expanded rather than retrenched social assistance. Led by a technical team and with strong and direct political support from President Antonio Saca (2004–9), Red Solidaria targets rural children living in extreme poverty. As in other programs of this kind, the program transfers income (US$30 every two months), contingent on school attendance and health monitoring. Unlike many of these programs, Red Solidaria pursues training among mothers and, although still only theoretically, foresees measures for income generation. This support has been very well received (Góchez 2008) by the 83,654 beneficiary families (Government of El Salvador 2009) in a country in which the majority of the population has had little or no experience with state redistribution. In fact, assessments show a sense of gratitude toward the government and more specifically toward the president, rather than a perception of such assistance as a “right” (Góchez 2008). It is therefore uncertain whether the program contributes to collective action among recipients and/or alliances with other sectors such as nongovernmental organizations in charge of training and follow-up of families. So far, the relationship is very much one-on-one, between the program and individual recipients. Overall, in comparison with the early 1990s, low-income groups’ access to social ser vices, although still basic, has somewhat improved, while middleclass access has worsened. However, improved or worsened access is not necessarily the result of collective action or autonomous organization but reflects technocratic and residual patronage. Nonetheless, within the context of tight bipartisan electoral competition, increased access does give the poor electoral power. For example, neither the Right nor the Left would dare to remove cash transfers at this point. Moreover, during the electoral campaign that led to the fi rst left-wing government in the history of El Salvador in 2009, the right-wing party ARENA promoted many of the long-term redistributive claims made by the Left, such as antipoverty and pro-equity measures, something that was unthinkable just a decade ago. In summary, starting from an exclusionary social policy regime that was weakened during the war, the role of societal versus elite coalitions varies with the social policy sector: bipartisan and societal in education; right-wing

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and top-down in pensions; top-down but distributive in social assistance; and societal and defensive rather than transformative in health care.

Conclusions The evidence from the exploratory analysis of three contrasting Latin American countries presented in this chapter shows that the type of welfare regime does provide relevant clues to understand the existence of societal distributional coalitions and their effect on redistribution. It suggests that societal coalitions have been and may continue to be weak in market welfare regimes, strong in state welfare regimes, and sector based in familialistic welfare regimes. However, distribution has often been triggered by elite rather than societal distributional coalitions. Of course, with elite coalitions, the scope of distribution has largely depended on the ideology of the elites involved in top-down policy design and implementation. These findings suggest that we need to explore the role and nature of distributional coalitions further, in the context of intraregional variations and patterns in welfare and social policy regimes. To this purpose, we need to bring in cultural dimensions and relate research on welfare regimes to pioneering studies on elites’ perceptions of poverty and inequality as presented by Elisa Reis (see chapter 3 in this volume). For better or for worse, different welfare regimes have margins of action that are structurally distinct, reflecting particular historical trajectories of degrees of commodification achieved by the workforce, as well as degrees to which risk management has been transferred from families (and unpaid work) to the field of public policy. State-led welfare regimes, such as Costa Rica, Brazil, and Uruguay, clearly differ from the market-led welfare regimes of Argentina and Chile in the extent to which liberal reforms—based on privatization, decentralization, and targeting—have taken place during the past two decades. In addition, countries with familialistic welfare regimes differ from countries under market- and state-led welfare regimes in that they have weaker and less extensive social policies. Therefore, the same targeted social programs that meant retrenchment of social policy in market- and state-led welfare regimes actually implied an expansion of redistribution in familialistic welfare regimes. In all three countries, the question remains whether social policy changes will have sufficient effects to transform the welfare regimes within which social policies exist, as well as their ability to generate more equitable distribution. Our analysis indicates that such a transformation would require moving from elite to societal distributional coalitions in Chile. In El Salvador, on the other hand, elite coalitions may make a considerable difference, given the ideological change that has taken place among the elite in office, from a rightwing to a left-wing government. Because social needs are very pressing, such

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a government may also require a combination of reliance on and detachment from societal distributional coalitions. In Costa Rica, fi nally, transformations may require drawing from societal coalitions that have proved quite effective in maintaining the redistributive effects of social policies. Such coalitions, however, have clashed and may continue to clash with elites in office who aim at moving more toward the Chilean approach to redistribution. In all three countries, welfare regimes are under stress because of tensions between elites and interest groups, whether these are in favor of distribution or not. These tensions seem to move toward more protection in Chile, less protection in Costa Rica, and more effective state participation in El Salvador.

Notes 1. For taxation, the other key policy component of redistribution, see chapter 10 of this volume. 2. Accounting for no more than 1 to 2 of GDP and no more than 10 of social spending, these programs are relatively cheap but allow bypassing political constraints to move from contributory, regressive policies to reaching a wider scope of the population (see Filgueira et al., chapter 8 in this volume). In addition, these programs gained political support from neoliberal parties, which claim that social policy should be targeted to the poor alone. 3. We mean inequality of outcomes. For the distinction between inequality of outcomes and inequality of opportunities, see chapter 2 by Anna Crespo and Francisco Ferreira in this volume. So far, no investigation that we are aware of has looked into how welfare regimes perform with regard to inequality of opportunity. Because welfare regimes help simplify our understanding of a rather complex regional reality, such research could make an important contribution to public policy making. 4. This familialism is qualitatively distinct from that of European and North American countries. In those regions, familialism is a more specific concept, referring to countries in which families are expected to take on the responsibilities of care work almost exclusively. In Mediterranean Europe, for example, the role of the state in care is relatively small compared with the role of the family. These countries are distinct from other European countries, in which a large share of the care work is left to the market (as in the United States) or to public social programs (as in Sweden). In contrast, in Latin America, we find ourselves confronted with a much broader notion of familialization. Families are expected not only to take on the responsibilities of care work but also to transform themselves into productive units and networks of social protection, particularly because of the weakness or disappearance of the boundaries between the different practices of resource allocation. This broadening of family roles involves changes in gender roles (Martínez and Voorend 2009). 5. We are aware that social inequalities do not automatically translate into political preferences (see Blofield and Luna, chapter 5 in this volume). That said, this chapter seeks to make a contribution toward better understanding whether and how social structures actually are reflected in demands for redistribution. 6. These three countries are also case studies for a larger research project being conducted by Martínez Franzoni and Voorend at the Institute of Social Research (University of Costa Rica) that addresses the complex interrelations between welfare regimes and gender relations. 7. As Jeremy Seekings pointed out when reading a previous version of this chapter, “Including and excluding social security is methodologically difficult when you are comparing countries that have socialized versus what I call semisocialized systems. In South Africa, for example, standard data exclude social security, although there are many statutory obligations and restrictions on ‘privatized’ contributory systems, and there may be extensive socialization of risk at the industrial level even if not at the national level” (personal communication, April 2008). 8. It is important to note here that there exist considerable discrepancies in data on Gini coefficients in the three countries. For reasons of comparison, we use the data as presented in CEPAL (2009) for all three countries.

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9. The progressiveness of social policy is either positive or negative, depending on policy design. A targeted policy may be more progressive than a universal policy that seeks to reach the middle and middle-upper class. 10. For Chile, data do not allow cross-time analysis. 11. The 2004 data are from a special household survey on income and spending conducted in Costa Rica this year. They are not part of a series but are comparable to a similar 1988 survey. While they are more accurate than regular household surveys, data are not directly comparable to the data used by CEPAL. This is why table 11.4 does not include these data. 12. The term “formal workers” is not equivalent to permanent formal workers. Being employed in the formal sector does not necessarily mean having a stable and permanent formal job. Many workers in the formal sector work on contract base, for professional ser vices. These workers are not protected by the norms established under the Chilean Labor Legislation, nor do they have the same access to social security benefits as a permanent formal workers (Sisto 2009).

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Martínez Franzoni, Juliana, and Koen Voorend. 2009. “Sistemas de patriarcado y regímenes de bienestar en América Latina. ¿Una cosa lleva a la otra?” Documento de Trabajo No. 37, Fundación Carolina–CeALCI, Madrid. Menjívar, Mauricio. 2008. General secretary of Union of Physicians at the Salvadoran Social Security Institute. Interview by Juliana Martínez Franzoni, San Salvador, May 29. Mesa-Lago, Carmelo. 2003. El sistema de seguridad social de El Salvador después de cinco años. San Salvador: Fundación Frederich Ebert. O’Donnell, Guillermo. 1999. “Pobreza y desigualdad en América Latina: Algunas reflexiones políticas.” In Pobreza y desigualdad en América Latina: Temas y nuevos desafíos, edited by Victor Tokman and Guillermo O’Donnell, 69–96. Buenos Aires: Paidós. Orellana, Miguel. 2008. Member of the Asociación Salvadoreña de Promoción de la Salud. Interview by Juliana Martínez Franzoni, San Salvador, May 25. Pierson, Paul. 1994. Dismantling the Welfare State? Reagan, Thatcher, and the Politics of Retrenchment. Cambridge: Cambridge University Press. PNUD. 2008. Informe sobre el desarrollo humano El Salvador, 2007–2008. San Salvador: PNUD. Portes, Alejandro, and Kelly Hoff man. 2003. “Latin American Class Structures: Their Composition and Change During the Neoliberal Era.” Latin American Research Review 38 (3): 41–82. Pribble, Jennifer. 2008. “Protecting the Poor: Welfare Politics in Latin America’s Free Market Era.” PhD diss., Department of Political Science, University of North Carolina at Chapel Hill. Pribble, Jennifer, and Evelyne Huber. 2008. “Social Policy and Redistribution Under Left Governments in Chile and Uruguay.” Paper prepared for delivery at the workshop “Social Policy Against Poverty and Social Exclusion: Dealing with Informality,” European Union Center for Excellence, University of North Carolina at Chapel Hill, March 29–30. Raczynski, Dagmar. 2008. Sociologist. Interview by Koen Voorend and Ariana Araujo, Santiago, Chile, June 4. Seekings, Jeremy. 2008. “Welfare Regimes and Redistribution in the South.” In Divide and Deal: The Politics of Distribution in Democracies, edited by Ian Shapiro, Peter A. Swenson, and Daniela Donno, 19–42. New York: New York University Press. Seligson, Mitchell, and Juliana Martínez Franzoni. 2009. “Limits to Costa Rican Heterodoxy: What Has Changed in ‘Paradise’?” In The Politics of Democratic Governability in Latin America: Clues and Lessons, edited by Scott Mainwaring and Timothy Scully, 307–16. Palo Alto: Stanford University Press. Sisto, Vicente. 2009. “Cambios en el Trabajo, identidad e inclusión social en Chile: Desafíos para la investigación.” Revista Universum 24 (2): 192–216. Superintendencia de Salud de Chile. 2005. “Informe Requerido por el Tribunal de Defensa de la Libre Competencia.” http://www.supersalud.cl/difusion/572/w3 -article-536.html. Trejos, Juan Diego. 1993. “Costa Rica: La respuesta estatal frente a la pobreza: Instituciones, programas, y recursos.” In Estrategias de combate a la pobreza, edited by Dagmar Raczynski, 163–215. Santiago, Chile: CIEPLAN/BID. ———. 2006. “Pobreza y gasto público social en Costa Rica.” In Jornada anual de la Academia de Centroamérica 3: Pobreza en Costa Rica, edited by Víctor Hugo Céspedes and Ronulfo Jiménez, 39–45. San José, Costa Rica: Academia de Centroamérica.

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———. 2007. “¿A quién beneficia el gasto público social en Costa Rica?” In Distribución del ingreso en Costa Rica 1988–2004, edited by Victor Hugo Céspedes and Ronulfo Jiménez, 89–134. Jornada anual de la Academia de Centroamérica 4. San José: Academia de Centroamérica. ———. 2008. “Basic Social Ser vices in Costa Rica: Achievements and Bottlenecks Since 1950.” Paper in preparation for the 2010 UNRISD Flagship Report: Combating Poverty and Inequality, UNRISD, Geneva. Villasuso, Juan Manuel. 1992. “Fondos y programas sociales en Costa Rica durante los ochenta.” In Fondos y programas de compensación social: Experiencias en América Latina y el Caribe, edited by the Pan American Health Orga nization (PAHO)–World Health Orga nization (WHO), Health Policy Development Program. Washington, D.C.: PAHO/WHO. World Bank. 2009. “World Development Indicators.” In World Bank electronic resources data set WDI. http://data.worldbank.org/data-catalog/world -development-indicators.

Conclusion: Inequality and the Politics of Redistribution Merike Blofield

What do the chapters in this volume tell us about the relationship between inequality and politics? This volume has sought to focus on the various stages of the policy process—public opinion and framing, agenda setting and electoral platforms, and public policies—in order to gain a comprehensive view of the interaction between inequality and politics. Overall, we find that inequalities have reinforced elite influence over framing, agenda setting, and public policies and have made it harder for subaltern groups to get their voices heard and their interests addressed, and for more equitable policies to be implemented consistently. We can see the effects of a vicious cycle; inequalities perpetuate inequalities through various mechanisms— threat of capital flight, elite culture, media access and framing, campaign financing, agenda setting on specific policies, and taxation and social policies. The structural constraints of unequal power-conferring resources have entrenched limited room for maneuver by politicians and civil society actors who may seek more equity and redistribution. On the other hand, political agency does matter. Two decades of elections, promises, and turnarounds have aggravated the contradictions between democratic citizenship and deep socioeconomic inequalities, and we may be currently witnessing a regionwide political reaction to them. Indeed, as Filgueira and colleagues argue in chapter 8, “When deep-seated inequality meets democratic electoral politics and the expansion of market mechanisms, the perception of incorporation suffers. This is precisely what has happened in Latin America in the past twenty-some years since the end of authoritarian regimes and the experiment of the Washington Consensus. The shift to the left in Latin America is nothing more than the political expression of a crisis of incorporation.”

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Some caveats about the findings of our volume are in order. It is important to keep in mind, of course, that socioeconomic inequalities are one variable among many that influence specific political configurations and outcomes. Institutions, political parties, and historical legacies are some other key variables. In this volume, however, we have focused specifically on socioeconomic inequalities, and our goal has been to examine sociopolitical tendencies that are conditioned by inequalities, and that may in turn have effects on inequality. We have done so with the conviction that although many of the other variables have received significant attention in the literature, inequality has to date been neglected. It is also important to keep in mind that we have drawn on a variety of country experiences in the past two decades and on a variety of different methods. This feature has brought richness and multidimensionality to our analysis, but it has also made it more eclectic. Indeed, variation across countries is high, and attempts at generalization always involve risks. Hence, instead of providing definitive answers, this volume has sought to open new questions and propose new approaches for future studies of the political economy of inequality in Latin America. Here I present general tendencies and conclusions; they may not—and probably will not—apply to all countries in the region since democratization. I discuss the findings of this book in relation to two dimensions: the manifestations and effects of inequality on politics and the factors that constrain and promote redistributive platforms and policies. Finally, I discuss the current shift to the left and policy implications that arise from our findings.

Manifestations and Effects of Inequality The introduction provided an overview of the high income inequalities in the region. As Filgueira notes in chapter 1, Latin America is plagued by “bad inequalities” coming from “monopolies and political agreements . . . and privileged systems of protection next to a total lack of coverage” rather than from innovation. Several authors make explicit comparisons of Latin America with other regions of the world. Filgueira (chapter 1) shows how high inequalities have conditioned the development of the region as a whole and in a way that sets it uniquely apart from the rest of the world, even when one takes into account the significant variation in development levels within the region. Blofield and Luna (chapter 5) show how inequalities condition preferences on redistribution, where more equal countries tend to have higher preferences for redistribution as well as a stronger social consensus on it. Mahon (chapter 10) shows

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that Latin American countries are unique in the low tax rates imposed on the wealthy, compared with both OECD countries and other middle-income countries. Crespo and Ferreira (chapter 2) examine the microlevel of inequalities in Latin America by distinguishing between inequalities resulting from choice and those caused by circumstances, arguing that “not only [are unequal opportunities] more widely agreed to be entirely unjustifiable and unfair, but [they] can also compromise growth and development by wasting human potential and undermining the integrity of institutions.” In sum, in Latin American countries, people’s economic achievements, as well as their levels of education and health, are significantly conditioned by their circumstances, not their choices. As chapters 1 and 2 show, more broadly, inequalities in health, education, and economic well-being are mutually reinforcing and overall condition people’s life opportunities. Hence societies are less merit oriented, and this feature affects both economic development and social and political stability. When people’s life opportunities are systematically undermined because of factors beyond their control, they are likely to feel disillusionment and resentment. Youth may also be inclined to engage in illegal forms of economic survival (not directly addressed in this book). Filgueira and colleagues (chapter 8) lay out the incorporation crisis that most people in the region today are coping with. Hughes and Prado (chapter 4) and Bugarin, Portugal, and Sakurai (chapter 7) analyze the impact of inequalities on media framing and campaign financing. Although their methodologies and case selections are quite different, their findings reinforce each other. Hughes and Prado, drawing on case studies of Costa Rica, Chile, Uruguay, and Mexico, indicate that concentration in media ownership is reflected in inequalities in representation and issue coverage. It narrows media representations of society and tends to overrepresent elite worldviews. Bugarin, Portugal, and Sakurai show, first through a gametheoretic model and then via empirical evidence on Brazil, that higher levels of income inequality, in the absence of effective regulation, appear to increase the costs of political campaigns because society and, correspondingly, party platforms are more polarized, and hence the stakes in winning versus losing are higher. What are the cultural manifestations of these inequalities? The evidence from Brazil (Reis, chapter 3) indicates that the elites are aware of inequality as a problem, and they consider its main threat to be crime and violence by the poor. They tend predominantly to see the cause of extant inequalities as lack of education (and the solution as more education for the poor) rather than other structural barriers. Moreover, they do not see themselves as part of the problem or responsible for contributing to the solution. Therefore, they see

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society as largely merit oriented, where better educational opportunities—or, even more individualistically, the poor choosing to take advantage of such opportunities—will solve the problem of inequality and poverty. As a politician in Reis’s chapter states: “When one is intelligent and determined, no doubt he or she can overcome poverty and move ahead.” This quote also implies that even if extant inequalities are excessively high, they are largely deserved and thus fair. Blofield and Luna (chapter 5) show that public opinion on redistribution tends to be more polarized in more unequal societies; that is, there is less consensus about what to do about inequality. Distribution of preferences is bimodal: most people want either starker differences or more equality, although the majority, especially over time, is moving toward the latter option. Hence it appears that there is little satisfaction with what the government has done but no clear consensus about what it should do. This lack of consensus also creates potentially unstable policies with changes in electoral cycles and governments. Over time, however, it appears that higher proportions of people are demanding more redistribution from the government, a trend that is also reflected in the recent shift to the left in the region, although, as both Blofield and Luna and Filgueira and colleagues (chapter 8) show, not systematically so. Blofield and Haas (chapter 9) show how class divisions influence the entire policy process on gender equality policies, both explicitly and implicitly, all the way from how a problem is defined by civil society actors and what makes it onto the political agenda to how a policy is implemented by state officials. In some cases, class divisions are explicit, for example, the threat that middle classes perceive when equal rights for domestic workers are on the agenda. In other cases, class divisions are implicit but nonetheless present; for example, issues that middle-class women prioritize—political representation and domestic violence—are more likely to be addressed than are issues where the effects of discrimination are contained among lower-class women, such as hospitalizations from illegal abortions and lack of access to means to prevent pregnancy through the public sector. The state itself has perpetuated socioeconomic inequalities in a variety of ways. This book has focused on two key (although not the only) mechanisms: taxation and social policies. Latin American states take in less tax revenue through direct taxes, particularly income taxes, than any other region of the world and thus maintain or exacerbate extant inequalities. In Mahon’s words (chapter 10), “The message is this: relative to income or in absolute terms, Latin America’s aversion to personal income taxation is dramatic, regionally consistent, and (absent major efforts) likely to continue.” On the expenditure side, although public education (except for higher education) and health coverage tend to concentrate in or at least reach the lower-income quintiles, social security expenditures in particular tend to re-

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produce and in some cases even to exacerbate extant inequalities (see De Ferranti et al. 2003; Huber, Pribble, and Stephens 2008; Lindert, Skoufias, and Shapiro 2006; and Filgueira, chapter 1 of this volume). In general, the states in the region provide little risk protection to the lower quintiles in society. As Martínez Franzoni and Voorend show in chapter 11 on social policies, despite clear differences, all Latin American countries are, to some extent, informal: most people are unable to cope with social risks through their participation in labor markets or through their access to public goods and ser vices. They are required to rely a great deal on family and community arrangements, largely based on female unpaid work. Although state redistribution is heterogeneous across countries, it is relatively small, and overall, not only do Latin American countries tax the wealthy less than advanced industrialized countries, but they also redistribute less through social policies.

The Politics of Redistribution What explains the politics of redistribution (or lack of redistribution)? This second question is related to but distinct from the first question regarding manifestations and effects of inequality. Here the focus is on distributive politics itself—that is, on whether and how socioeconomic inequalities are politically addressed. Returning to the question posed in the introduction, why have inequalities remained so high despite several decades of democratic politics? And, building on this question, what factors influence redistributive politics, including campaign platforms and policies today? The various manifestations of extant inequalities likely circumscribe the policy agenda on inequalities; however, other factors also come into play, and there is certainly no linear, single-variable explanation here. (That is, although the statement that past inequalities cause present inequalities certainly has some truth to it, it takes us only so far.) What, then, are some of the factors that have specifically influenced the politics of redistribution in Latin America? Hughes and Prado (chapter 4) indicate that the media have tended to reinforce an elite-dominant worldview and to overrepresent elite white men and underrepresent women, ethnic minorities, and people from the lower classes. Issue coverage tends to focus on crime and security, and this focus is likely to foster demands for punitive rather than preventive policies and to foster the perception of the lower classes as a threat. Calls for more redistribution and antipoverty policies to address exclusion and delinquency may have a harder time getting media coverage. Mahon (chapter 10) shows how governments in the past twenty years have chosen not to increase direct taxation but instead to rely more heavily on

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more regressive value-added taxes. “Having embraced globalization and cut taxes on trade, Latin American governments could have chosen to make up for lost income by leaning harder on either direct taxation (on income, profits, or property) or indirect taxation (on goods and ser vices). Why did they decisively choose the latter, given that they were already doing so to an unusual extent?” In the past two decades, Mahon argues, International Monetary Fund pressures induced many countries to move increasingly toward indirect taxation on sales and consumption as tariff barriers were dismantled. In addition, value-added taxation was considered an easier option than confronting the politically powerful economic elites by increasing or enforcing income and property taxation. This was justified with the argument that redistribution could be achieved better through progressive spending rather than revenue extraction. Ironically, however, as Mahon points out, political interests also influence spending decisions and patterns, and here also vested interests have prevented revamping, especially of social security systems. Another constraint is campaign financing. Not only does inequality increase the costs of campaigns, as shown by Bugarin, Portugal, and Sakurai (chapter 7), but in more unequal societies the wealthy, by definition, receive more income. Given this, they will be able to donate more to politicians and therefore have more sway over their actions. Although Bugarin, Portugal, and Sakurai do not directly address this dynamic, in the absence of effective regulation, it is also likely to further exacerbate inequalities because politicians need money to run their campaigns and will feel, correspondingly, more beholden to the wealthier donors than to their voter support base after the elections are over. This is a structural problem because they need continued donations for the next elections and will have incentives to maintain friendly relations with their donors. In addition, as Reis (chapter 3) shows, elites in Brazil do not view themselves as responsible for the high inequalities or as part of the solution. Moreover, public opinion is divided, as shown by Blofield and Luna, although the trend is toward more demands for redistribution. Given that women cut across class lines, gender equality policies are a particularly illuminating policy area through which to examine the independent and interactive effects of gender and class. In the absence of strong efforts to the contrary, Blofield and Haas show that agenda setting on women’s rights is likely to maintain class inequalities between women because implicit and explicit class divisions prioritize the interests of middle- and upper-class women, and issues that disproportionately affect poor women remain unaddressed. What happens when politicians do bring redistribution onto the political agenda? Campello (chapter 6) directly addresses the constraints that capital mobility during the past two decades since financial deregulation has imposed on politicians’ capacity to redistribute once in office. She argues that

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“prospects of increased income redistribution are likely to produce capital flight that, if turned into significant currency pressures, forces incumbents to deviate from their campaign promises and to implement policies closer to investors’ preferences.” She shows that “under negative exogenous shocks, when capital flight frequently turns into currency crisis, leftist presidents from Latin America have repeatedly chosen to switch [from redistributive platforms] to conservative economic programs in order to reattract investors to the economy.” These constraints, then, make politicians more responsive to international investors than to the redistributive demands of their support base. However, a change in structural conditions can also provide opportunities. “In booming periods, on the contrary, when international markets of goods and/or capital are unexpectedly favorable, governments on the left are provided with more room to deviate from investors’ preferred policies and to implement their announced programs. Under these circumstances, policy switches are less likely to occur” (chapter 6). Although Campello’s model leaves little room for political agency, the chapters by many of the other authors stake out more room for politics. Blofield and Haas (chapter 9) show that persistent collective action and coalition building by civil society actors, often over many years, and in conjunction with left-leaning parties, have in a few cases resulted in policies that not only address gender equality but also seek to mitigate class inequalities. Filgueira (chapter 1), Filgueira and colleagues (chapter 8), and Martínez Franzoni and Voorend (chapter 11) show that the determinants of social spending—more than taxation—have been driven more by domestic politics and policy legacies than by international pressures and fears of capital flight. However, the benefits have also tended to accrue disproportionately to the elites. Progressive social spending has been constrained by domestic policy legacies that have created vested interests. These vary significantly by country, but, overall, contributory systems that privilege higher-income workers in the formal sector reinforce deep inequalities. In cases where they are egregiously subsidized through general taxation, they are likely even to exacerbate inequalities. The political difficulties in shifting the bulk of social policy expenditures from contributory, regressive ones to targeted or universal policies are significant, given these organized interests. Within these constraints, and to bypass them, many countries have established relatively cheap, targeted antipoverty programs, often referred to as conditional cash-transfer programs, where monthly transfers are contingent on parents—or specifically mothers—keeping their children in school and taking them in for regular health checkups. These have overall been very successful in alleviating extreme poverty and in increasing school attendance rates with relatively low outlays. They also, along with other factors, slightly

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reduced inequalities during the 2000s (López-Calva and Lustig 2010). The size of the programs is minimal, though, and they account for no more than 1 or 2 percent of GDP and in general no more than 10 of total social expenditures in Latin American countries (chapter 8). Other structural barriers, such as low-quality education, the dearth of social ser vices such as affordable day care for families and specifically for working mothers, and the lack of well-paid formal-sector employment, still tend to keep these families in a cycle of poverty.

The Recent Left Shift: Redistribution Takes Center Stage Given the persistence of these problems, redistribution has gained increased political salience in recent years. Filgueira and colleagues (chapter 8) refer to “the crisis of incorporation” in Latin America and argue that a set of specific advances during the past two decades—“enduring electoral democracy, democratization at the subnational level, urbanization, education, and access to new communications technology with its impact on exposure to patterns of consumption”—made “the failure of the democratization of opportunities, income, and assets . . . all the more salient.” This crisis of incorporation, they argue, “represents the limit of the project of conservative modernization. Without a more profound redistribution of material welfare and a more truly meritocratic access to mobility channels, the region will remain profoundly politically unstable.” Although the authors chart varied responses to this incorporation crisis—from “radical populist” to “social democratic”—they make it clear that these responses are “frail” and that no new models or paths of incorporation have yet been set.

Can Latin America Reinforce a Virtuous Cycle of Equity and Democratic Politics? Although this book has not focused explicitly on policy but rather on an analysis of the nexus of inequality and politics during the past two decades, some policy implications worth mentioning emerge. For the state to have a broader impact on the skewed income distributions in Latin American countries, structural changes and long-term policies need to be more in line with the social democratic set of policies than the radical populist one, as outlined by Filgueira and colleagues. Not only do the former tend to appear in more institutionalized, consolidated democracies (e.g., Chile, Uruguay, and Brazil), but also these policies are more compatible with

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long-term goals of economic development and social equity. The radical populist policies (e.g., in Venezuela and Ecuador), sustained by short-term commodity booms, are already facing serious threats to viability. As Campello notes regarding President Rafael Correa’s policies in Ecuador: “The incapacity to create or little effort devoted to creating an attractive environment for private investment raises concerns that [Correa’s] government may become just one more populist experience in Latin America, redistributive in the short term but unequipped to build capacity designed to foster wealth that can be redistributed in the future” (chapter 6). Venezuela under Hugo Chávez in mid2010 is seemingly heading toward serious economic difficulties. The challenge is to promote policies that seek social integration in the areas of health care, education, and social security, particularly for those in the informal sector, without losing market competitiveness but rather at the same time to enhance it. Indeed, López-Calva and Lustig’s (2010) findings from the first decade of the twenty-first century that educational upgradings and their impact on labormarket income, as well as cash transfers to the poorest, contributed to the decline in inequality during that decade certainly reinforce the social democratic policy choices. However, as they acknowledge, “The redistributive momentum is likely to face obstacles” (2010, 18) given the “entrenched power of elites” (19). Sustainably reducing inequality and its effects is a slow process that takes a long time. Therefore, intertemporally stable policy-making coalitions (or social pacts) are needed to make this occur. The tragedy is that those intertemporal coalitions are difficult to craft precisely when high inequalities exist. This difficulty also explains why, in spite of constant political change (and because of it), it is difficult to deal with inequality in Latin America. Given the historical pattern of Latin American resistance to democratization of funding the public good, will the democratic political systems of the early twenty-first century be able to do better than those of previous periods? Both Mahon and Filgueira and colleagues call for a national project of incorporation. This project must include the elites, the middle classes, and the informal sector. In other words, a commitment from the middle and upper classes is needed in order to incorporate the informal sector. Mahon (chapter 10), citing an ECLAC book, calls for a social contract to fund social protection, “to be drawn up and affirmed by key societal representatives at meetings convened by national governments. . . . Its key pillar would be a ‘fiscal covenant,’ which would begin with an acknowledgment of governments’ right to collect taxes and an agreement on the level of taxation appropriate to the country’s social needs and economic capacity.” In addition to a revenue commitment from the wealthy, governments should enforce strict campaign finance laws (Bugarin, Portugal, and Sakurai, chapter 7), as well as regulations to allow alternative voices and views to be heard in the media (Hughes and

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Prado, chapter 4) to allow more equity-enhancing policy proposals to make it into public debate and onto the political agenda. Clearly, and as Filgueira, Filgueira and colleagues, and Martínez Franzoni and Voorend show in chapters 1, 8, and 11, respectively, governments need to rationalize their expenditures to promote more equity-enhancing policies. I will stress two (although certainly not the only) key policy areas where one could get the most bang for the buck in narrowing the vast gap between the rich and the poor: education and the labor market. As Crespo and Ferreira note in chapter 2, the key challenge in education today is to improve quality, not coverage of basic education. However, one particularly strategic policy area should involve coverage extensions as well: early childhood education and care (ECEC). States need to extend preschool education and care to more young children in the region, particularly in low-income communities. As Filgueira notes in chapter 1, this would have many virtuous effects. First, it would have positive effects on human capital and on equality of opportunities; one longitudinal study done in the United States found that one dollar invested in a preschool education program generated 17 dollars in future benefits (UNESCO 2007, 125). Significant investments in ECEC today could make a real difference in equality of opportunities a decade or two down the road. Second, with adequate hours, ECEC would provide de facto day care to working mothers, which is a neglected and vital ser vice for lower-income women in the region, particularly for female heads of households. According to a recent UNDP/ILO report (2009), 30 of households in the region today are female headed, without the presence of an adult male, up from only 23 two decades ago. In these households, women bear the burden of providing both income and care to their children alone, and they are more likely to find themselves in extreme poverty. Many of these women are among the twelve million domestic workers in the region, as discussed in chapter 9, and they often have to leave their own children behind for long periods of time to work in the households of wealthier families. Such services could be particularly beneficial for these women and their children. Third, extension of ECEC would provide decent formal-sector employment to many women who desperately need jobs. It would keep children off the streets, where they can become targets of and involved in crime. Finally, it would help older girls who are often forced to drop out of school to become caretakers of younger siblings while their parents seek income. Relatedly, regarding the labor market, states should institute proactive policies to reduce the size of the informal sector by providing incentives for employers, employees, and the self-employed to formalize their companies and to begin making social security contributions. These policies will require

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significant incentives at the beginning to overcome the perceived costs of formalization, and these incentives will require revenue commitments. Of course, this should be done with realistic aspirations; as Centeno and Portes have noted, the “obvious solution is less regulation with a state machinery capable of implementing existing laws” (2006, 41). For instance, social security contributions should at least initially be very low and easy to calculate for low-income workers, reducing barriers to entry. This is not a utopian proposition; between 2006 and 2008, Uruguay was able to increase the social security registration rates of domestic workers from 20 to 50 through a government campaign (Blofield, forthcoming). Over time, such formalization will reduce social risks, as well as the gap between rich and poor, and can become self-sustaining. What might be the “windows of opportunity” to persuade the middle and upper classes to invest in a “social contract” and to allow governments to gear public expenditures toward the “unincorporated”? As Reis suggests (chapter 3), there may be support among elites for more public investments in education. This support could also be articulated in relation to their perceived fear of crime as an effect of poverty and inequality: prevent crime by providing people with opportunities through education and, relatedly, decent jobs. As she notes in her chapter, drawing on De Swaan (1988), European elites a century ago were convinced partly by self-interest, including fear, to make concessions to the lower classes and laid the foundations of the modern welfare states. Drawing on this focus on self-interest, one can also make the age-old argument that reforms now can stave off revolution or rebellion later. Currently, many governments have reasonably raised the expectations of the poor with more left-wing platforms and policies. However, the current global economic slowdown can have potentially devastating effects on those already living at the margins of survival. Here, governments face difficult challenges and need to extend social protections, not cut them (as was often the case in the 1980s). However, this will involve restructuring social expenditures and may actually provide “windows of opportunity” in areas that were politically untouchable in the past. Th is may be a time when governments can muster the will and necessary public support to rationalize expenditures and cut middle- and upper-class subsidies in areas related to social security, utilities, and higher education. Given that the support bases in many countries do include the popu lar sectors, who are now more politicized than before, these moves may be necessary, as well as politically feasible. A quote from Bolivia’s vice president, Álvaro García Linera, is indicative: “From a strategic point of view, the most privileged sectors would understand that the best way to preserve part of their privileges is to cede

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part of their privileges. But when they are not willing to cede a part of these privileges, what that does is generate a pressure that’s more and more adverse to them, with the risk that it could affect all their privileges” (Carlsen 2007). Aside from the issue of whether all the actions and policies of Bolivia’s current government are beneficial to equity, to the public good, and to democratic consolidation in the long term, the point made by García is a crucial one, and it was also part of the reasoning that prompted the elites in many European countries to give in, at least partially, to the socioeconomic and political demands made by the lower classes. Another, more optimistic set of arguments in favor of a social contract is the successful experiences of the left-wing governments of Uruguay, Chile, and Brazil in reducing poverty (and even slightly reducing inequalities) without changing the fundamental market orientations of the countries’ economies. Indeed, the huge popularity of Luiz Inácio Lula da Silva in Brazil, Michelle Bachelet in Chile, and Tabaré Vázquez in Uruguay is a positive sign that social-democratic-leaning policies, once in effect, can even be acceptable to people who identify themselves on the right. It implies that antipoverty successes may be creating a more receptive political climate for more and broader policies, including the distributive coalitions discussed by Martínez Franzoni and Voorend in chapter 11. (Whether and how these dynamics have shifted since the ascension of right-wing Sebastian Piñera to the presidency in Chile in 2010, after twenty years of center-left government, remains to be fully seen. The election victory itself was less related to Bachelet and perceptions of her social policies and more linked to the inability of the governing coalition to provide a viable successor.) In a more academic vein, we still have much to learn about the relationship between inequality and politics. More country-specific research linking inequalities and perceptions of them with media framing, campaign financing, presidential campaigns, political party platforms, and the policy process and outputs is needed in order to understand how these mechanisms interact in national contexts. Another area that needs more research—and that has not been addressed here—is the relationship among inequalities, crime and public opinion on it, and political reactions. In addition, we could use more detailed investigations of the sociopolitical effects of the equity-enhancing policies pursued by left-wing governments in Brazil, Chile, and Uruguay. Finally, more research on comparative elite attitudes and behavior across countries with different institutional and policy legacies, and with different class and ethnic compositions, would be helpful, even if more challenging to systematically study. A comparative survey by the Center for Research in International Relations at the University of São Paulo, investigating elite attitudes on poverty and inequality in six Latin American countries, is a good start (Holzhacker 2010).

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The challenge for Latin American countries, which many have sorely failed to meet, is to provide their citizens, especially less well-off citizens, with the opportunity to live decent, fulfilling lives and to participate in politics in a meaningful way. Important obstacles to achieving this goal are the deep socioeconomic inequalities of these countries. Too often the importance of these inequalities, both theoretically and policy-wise, has been pushed aside with the arguments that “the economy must grow, and we can redistribute later,” or that “we must first consolidate democratic institutions and then concern ourselves with distributive issues.” However, these arguments ignore not only the negative effects of these inequalities on economic growth and on democratic consolidation, they also ignore the urgency of guaranteeing a life of dignity to all people in the here and now, and thus undermine one of the very purposes of democratic governance, for the people and by the people.

Note 1. Of course, an analysis of the determinants of levels of inequality—which has not been the focus of this book—must go beyond the state and public policies. Broader economic, sociodemographic, and technological changes, within the context of state policies, are also likely to influence actual policy outcomes and levels of inequality.

References Blofield, Merike. Forthcoming. Carework and Class: Domestic Workers’ Struggle for Equal Rights in Latin America. University Park: Pennsylvania State University Press. Carlsen, Laura. 2007. “Bolivia— Coming to Terms with Diversity: An Interview with Álvaro García Linera, Vice President of Bolivia.” Americas Policy Program Special Report, November 16. http://upsidedownworld.org/main/ bolivia-archives -31/998-bolivia-coming-to-terms-with-diversity-interview-with-alvaro-garcia -linera?format = pdf. Centeno, Miguel Angel, and Alejandro Portes. 2006. “The Informal Economy in the Shadow of the State.” In Out of the Shadows: Political Action and the Informal Economy in Latin America, edited by Patricia Fernández-Kelly and Jon Shefner, 23–48. University Park: Pennsylvania State University Press. De Ferranti, David, Guillermo E. Perry, Francisco H. G. Ferreira, and Michael Walton. 2003. Inequality in Latin America and the Caribbean: Breaking with History? Washington, D.C.: World Bank. Holzhacker, Denilde. 2010. “South American Elite Views on Democracy and Inequality.” Observatory on Inequality in Latin America Working Paper No. 28, Center for Latin American Studies, University of Miami, March. http://www .observatoryla.org/observatoryla/publications/paper-series. Huber, Evelyne, Jennifer Pribble, and John D. Stephens. 2008. “The Politics of Effective and Sustainable Redistribution.” In Stuck in the Middle: Is Fiscal Policy Failing the Middle Class? edited by Antonio Estache and Danny Leipziger, 155–88. Washington, D.C.: Brookings Institution Press.

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Lindert, Kathy, Emmanuel Skoufias, and Joseph Shapiro. 2006. “Redistributing Income to the Poor and the Rich: Public Transfers in Latin America and the Caribbean.” SP Discussion Paper 0605, World Bank, Washington, D.C. López-Calva, Luis F., and Nora Lustig, eds. 2010. Declining Inequality in Latin America: A Decade of Progress? Washington, D.C.: Brookings Institution Press. UNDP/ILO. 2009. Trabajo y Familia: Hacia nuevas formas de conciliación con corresponsabilidad social. Geneva: UNDP/ILO. UNESCO. 2007. Global Monitoring Report: Strong Foundations; Early Childhood Education and Care. Paris: UNESCO.

contributors

Pablo Alegre taught at the Social Sciences Department in the Human Sciences Faculty of the Catholic University of Uruguay and was a graduate of the same faculty. He was also a researcher in the Integration, Poverty, and Social Exclusion Program in the same faculty and a researcher in the Political Science Department in the University of the Republic in Montevideo, Uruguay. His research on welfare regimes, labor policy, and party systems is published in Prisma, Revista Uruguaya de Ciencia Política, Revista de Ciencia Política, and International Labor Review, among other periodicals. He passed away prematurely in 2009 after a long struggle against cancer. Merike Blofield is associate professor of political science at the University of Miami and received her PhD from the University of North Carolina at Chapel Hill in 2003. She directed the Observatory on Inequality in Latin America, a three-year project funded by the Ford Foundation (2007–9), of which this book is one of the results. Her publications include The Politics of Moral Sin: Abortion and Divorce in Spain, Argentina, and Chile (2006) and articles in Comparative Politics, the Latin American Research Review, Latin American Politics and Society and the Spanish-language Journal of Democracy. Her book Carework and Class: Domestic Workers’ Struggle for Equal Rights in Latin America is forthcoming at Pennsylvania State University Press in 2012. Maurício Bugarin has a PhD in economics from the University of Illinois at Urbana–Champaign. He is currently professor of economics at the Centro de Estudos em Regulação de Mercados, CERME, University of Brasília, Brasília. He was also professor of economics at Insper Institute, São Paulo, where he served as the director of undergraduate studies in economics. He was co-organizer of the First Brazilian Workshop of the Game Theory Society and co-founder of the master’s program in public policy at the University of Brasília. Bugarin’s main interests are the interaction between economics and politics, and he publishes on such topics as voting behavior, electoral campaign financing, fiscal federalism and political business cycles, monetary policy, and health economics. His research has won several prizes, including several

392

Contributors

Brazilian Treasury Secretariat Research Prizes and the 2002 Haralambos Simeonidis Prize for the best paper by a Brazilian author. Daniela Campello is assistant professor in the Department of Politics and the Woodrow Wilson School at Princeton University. She received her PhD in political science at UCLA and her MA at IUPERJ (University Research Institute of Rio de Janeiro, currently IESP—Graduate Institute of Social and Political Studies), Brazil. Her research interests are on international and comparative political economy, and she is currently working on a book on the politics of international finance in emerging-market countries. Anna Crespo is an evaluation economist at the Inter-American Development Bank and a PhD candidate in the Economics Department at Princeton University, where she received her master’s degree in 2006. Her two fields of study are development economics and applied econometrics. Currently, her main research interests are inequality of opportunities and health economics. Earlier, she received a bachelor’s as well as a master’s degree in economics from the Pontifícia Universidade Católica de Rio de Janeiro, Brazil. There she worked mainly on labor economics, with a focus on discrimination in the labor market and labor-market institutions. Francisco H. G. Ferreira is a lead economist at the World Bank’s Research Department and a research fellow at the Institute for the Study of Labor (IZA, Bonn). During his World Bank career he has also served as Deputy Chief Economist for Latin America and the Caribbean and as co-director of the World Development Report 2006: Equity and Development. He has published widely in the fields of poverty, inequality, and the political economy of development and serves on the editorial boards of the Journal of Economic Inequality, the Review of Income and Wealth, the World Bank Economic Review, and the Economic Analysis Review. Between 1999 and 2002 Francisco was an assistant professor of economics at the Catholic University of Rio de Janeiro. He holds a PhD in economics from the London School of Economics. Fernando Filgueira is social affairs officer in the Social Affairs Division at ECLAC. He received his PhD in sociology from Northwestern University. He has published books and articles on models of socioeconomic development, on welfare regimes and social policy, and on social stratification and social structure. Some of his recent publications include El desarrollo maniatado en América Latina: Estados superficiales y desigualdades profundas (2009); Cohesión, riesgo, y arquitectura de protección social (2007); and “The Latin

Contributors

393

American Social States: Critical Junctures and Critical Choices,” in Democracy and Social Policy, edited by Yusuf Bangura (2007). His prior positions include coordinator of the Program of Studies on Integration, Poverty, and Social Exclusion at the Universidad Católica de Uruguay, senior investigator at the Centro de Informaciones y Estudios del Uruguay, and director of the Area for State Evaluation and Management at the Office of Planning and Budget of the Presidencia in Uruguay. Liesl Haas is associate professor of political science at California State University, Long Beach. She received her PhD from the University of North Carolina at Chapel Hill in 2000. Her research interests focus on gender and politics, religion and politics, and nationalism. Her book, Feminist Policymaking in Chile, was published by Pennsylvania State University Press in 2010. She is currently working on two projects, one that explores the impact of gender quotas on public policy in Costa Rica, and another that explores American national identity in comparative perspective. Sallie Hughes is associate professor in the School of Communication, University of Miami, and received her PhD from Tulane University. She is author of Newsrooms in Conflict: Journalism and the Democratization of Mexico (2006), which was published in Spanish in 2009. Her co-authored article “The Barriers to Media Opening in Latin America” (Political Communication, 2005) was made a Sage Publishers Benchmark in Political Communication in 2007. Juan Pablo Luna holds a PhD in political science from the University of North Carolina at Chapel Hill and is an associate professor at the Pontificia Universidad Católica de Chile. His research focuses on the political sociology of Latin American party systems and the political economy of development and democracy in that region. His articles have appeared in Comparative Political Studies, Política y Gobierno, Revista de Ciencia Política, Latin American Politics and Society, International Political Science Review, Third World Quarterly, Journal of Latin American Studies, Electoral Studies, and the Journal of Democracy. In 2010, along with Herbert Kitschelt, Kirk Hawkins, Guillermo Rosas, and Elizabeth Zechmeister, he published the book Latin American Party Systems. James E. Mahon Jr. is Woodrow Wilson Professor and chair of the Political Science Department at Williams College, Williamstown, Massachusetts. He has a PhD from the University of California at Berkeley and an AB from

394

Contributors

Dartmouth College. He also taught at the Centro de Investigación y Docencia Económicas in Mexico City (2003). He has published widely on political economy and Latin American politics, including articles in the American Political Science Review, Latin American Research Review, and Current History, and has just completed a book manuscript on the relationship between state revenue sources and governance. Juliana Martínez Franzoni is an associate professor at the University of Costa Rica. Her most recent publications include “Limits to Costa Rican Heterodoxy: What Has Changed in ‘Paradise’ ” (with Mitchell Seligson), in The Politics of Democratic Governability in Latin America: Clues and Lessons, edited by Scott Mainwaring and Timothy Scully (2010); Domesticar la incertidumbre en América Latina: Mercado laboral, política social, y familias (2008); “Welfare Regimes in Latin America: Capturing Constellations of Markets, Families, and Policies,” Latin American Politics and Society (2008); and “Costa Rica’s Pension Reform: A Decade of Negotiated Incremental Change,” in Lessons from Pension Reform in the Americas, edited by Stephen Jay Kay and Tapen Sinha (2008). Adriana Cuoco Portugal received a BA in civil engineering and an MA and a PhD in economics at the University of Brasília. She currently works at the Brazilian Federal District Court of Audit, where she is the director of the Public Works Audit Group. Before this, she was a visiting researcher at the University of Illinois at Urbana–Champaign. Her main interest is the interaction between economics and politics, with an emphasis on government expenditures and electoral campaign financing. Paola Prado is assistant professor at the School of Communication at Roger Williams University. She holds a PhD from the University of Miami and an MA from Georgetown University. Her research focuses on the adoption of information and communication technologies for development and social change in Latin America. She is the co-creator of the Comunicadores para el Desarrollo journalism and multimedia workshop program, which trains community reporters in underprivileged rural areas in the Dominican Republic. Elisa P. Reis is professor of political sociology at the Universidade Federal de Rio de Janeiro and director of the Interdisciplinary Network for the Study of Social Inequality. Author of numerous books and articles, she is the co-editor of Elite Perceptions of Poverty and Inequality (2005), a study of values and beliefs of different elite sectors in Bangladesh, Brazil, Haiti, the Philippines, and South Africa. A research fellow of the Brazilian National Research Council,

Contributors

395

she is a member of the Brazilian Academy of Science and of the Academy of Science for the Developing World. Luis Reygadas is professor of anthropology at Universidad Autónoma Metropolitana Iztapalapa, México. His current areas of research include inequalities in Latin America and corporate culture. His most recent books are La apropiación: Destejiendo las redes de la desigualdad (2008) and Ensamblando culturas: Diversidad y conflicto en la globalización de la industria (2002). Sergio Naruhiko Sakurai received a BA, an MSc, and a PhD in economics at the University of São Paulo. He is now professor of economics at the University of São Paulo (Ribeirão Preto campus), and his main interests are political business cycles, economic policy and reelection, public fi nance, and campaign financing. Koen Voorend received an MSc in international economics studies from Maastricht University and another MSc in development studies and economics of development from the Institute of Social Studies, The Hague, both in the Netherlands. He currently lectures at the School of Communication of the Faculty of Social Sciences and researches at the Institute of Social Research of the University of Costa Rica. He is co-author of the book Sistemas de patriarcado y regímenes de bienestar en América Latina: ¿Una cosa lleva a la otra? (2009).

index

Note: Page numbers in italics indicate figures and tables. abortion politics of, 300–302 social conditions of, 299–300 women’s rights and, 13, 279, 280, 287, 298–302 affi rmative action, 100–101 agenda setting, 3, 4, 12–13, 137, 261, 278, 303 agglomeration, 247 aging population, 36, 42, 44, 50, 54 agrarian reform, 104–5 allocation criteria, for social expenditures, 358–60, 359 antipoverty programs, 267, 270–71, 383–84 Arabian Peninsula, 29, 31 Argentina attitudes toward inequalities in, 152, 174 community radio in, 115–16 diseases in, 42–43 export taxes in, 271 Gini index in, 6 human development in, 24 social security system in, 37, 38 wage increases in, 272 welfare regime in, 28 Asian fi nancial crisis, 190, 208 asynchronous modernization, 245–46 authoritarian regimes, 5, 245, 257, 260, 261, 377 automobiles, 252 Bachelet, Michelle, 356, 388 Bangladesh, 107n3 Bolivia export taxes in, 271 Gini index in, 6 human development in, 31 inequality of outcomes in, 78 life expectancy, 45 social security system in, 38 tax system in, 330 wage increases in, 272 borrowing, 340

Brazil attitudes toward inequalities in, 174 costs of electoral campaigns in, 218, 223–31, 224 country risk, 196 diseases in, 42–43 economic crisis in, 195–99 health care system, 48 human development in, 28 incorporation crisis in, 265 inequality of opportunity in, 64, 68 life expectancy in, 45 Lula and, 195–99, 212–13 policy switches in, 195–99 racial discrimination in, 101 redemocratization in, 89 reform scorecard, 198 social security system in, 37, 38, 55n9 welfare regime in, 34 women in, 101 Brazilian elite on affi rmative action, 100–101 on agrarian reform, 104–5 on civil society, 102–3 on domestic problems, 98 on education, 97–100, 102 on obstacles to democracy, 97 perceptions of poverty and inequality among, 89–107, 102, 379–80 on taxation, 99 on viability and desirability of policies, 98 broadcast media, 115 broadcast television, 112–13. See also television ownership of, 113, 117–20, 136–38 reach of, 115 cable television, 252 Caldera, Rafael, 207 campaign contributions, by lobbyists, 221–22, 234–40 campaign fi nancing, 12–13, 217, 221–22, 382 capital cities, 134–35

398

Index

capital fl ight, 173, 192–95, 212, 314, 335–36, 383 capitalism, 186–88, 342 capitalists, 8 capital mobility, 3, 12, 187–92, 195, 211–13, 335–36, 382–83 Caribbean, 28 cash-transfer programs, 266–67, 337, 365 Catholic Church abortion issue and, 287, 298, 300–302 opposition to women’s rights by, 280 political power of, 304n1 cell phones, 116, 252 Chávez, Hugo, 138–39, 194–95, 204, 206–11, 213, 385 chavismo, 210, 270–71 child care services, 53, 386 child dependency ratio, 24–25, 29, 33, 34 children health opportunities of, 74–79 nutritional status of, 75–79, 77, 80 responsibility for welfare of, 50 Chile attitudes toward inequalities in, 152, 168, 169, 172, 175 coalitions behind social policy reforms in, 364–67, 370 community radio in, 115–16 diseases in, 42–43 human development in, 24 income distribution in, 354, 354 incorporation crisis in, 265 media ownership, 117, 119 network television news in, 120–22, 124, 125, 132, 134 social expenditures in, 357, 357–58, 358–61 social policies in, 353–58 social reforms in, 267, 269 social security system in, 37–38 welfare regime in, 28 Christian Partido Unidad Social Cristiana (PUSC), 356 cities, 44, 254–55 citizenship, construction of, 268–69 civil marriage, 28 civil society, 102–3, 364, 366, 380, 383 class divisions, 3, 8–9, 282–83, 286, 288, 301–4, 380 classical social theory, 93 class mobility, 8–9 clientelism, 111 closed economies, 188 Colombia health care system, 48 human development in, 28 inequality of opportunity in, 64, 66, 68 inequality of outcomes in, 78

life expectancy in, 45 social security system in, 37–38 tax system in, 330 commercial radio, 115 commodity booms, 13, 186 communications revolution, 249 communication technologies, 252 community radio, 115–16, 139 conditional transfer programs, 266–67, 337 conservative modernization, 245–46, 260, 265, 274, 384 consumption patterns, 247, 249, 252, 253, 255 consumption taxes, 40, 313, 315–16, 332–38 contraception, 299 Convention for the Elimination of All Forms of Discrimination Against Women (CEDAW), 287 corporate social responsibility, 102 corporate taxes, 315 Correa, Rafael, 194, 200, 204–6, 213, 272, 385 Costa Rica coalitions behind social policy reforms in, 361–64, 371 diseases in, 42–43 Gini index in, 6 health care system, 48, 49 human development in, 24 income distribution in, 354, 354 network television news in, 120–22, 124, 125, 134 social expenditures in, 357, 357–61 social policies, 353–58 welfare regime in, 28 credit agencies, 40, 52 crime, 11, 131–32, 387 crony capitalism, 342 cross-border capital flows, 187–88 cross-class coalitions, 349 Cuba health care system, 48 media ownership, 117 revolution in, 248 cultural variables, poverty and inequality as, 90–95, 106 culture elite, 11 political, 92, 93 currency crises, 189, 192–96, 195, 212 democracy attitudes toward, 149 capitalism and, 187–88 challenges to, 258 durability of, 256–57 elite views of, 89 erosion of faith in, 257–58

Index inequality and, 1–2, 147–48 in Latin America, 1–2, 89–90, 110, 217, 248, 255, 255–60, 256, 259 liberal stability of, 257 obstacles to, 97 public policies and, 262 push for, 255–60 social function of, 258 democratization, 1, 5, 89–90, 147, 185–86, 255 demographics, 10, 26 demographic transitions, 27–28, 36 Denmark, 337 development, comparison of levels of, 21–34, 23 disease-burden indicators, 42–43, 43 distributional coalitions, 361–70 distributive justice, 91 dollarization, 204 domestic violence politics of, 289–93 social conditions of, 289 women’s rights and, 13, 279, 280, 287–93, 303 domestic workers’ rights, 13, 279, 280, 287–88, 293–98 dominant-culture hypothesis, 149 Dominican Republic attitudes toward inequalities in, 177 broadcast television in, 136–37 human development in, 31 inequality of outcomes in, 78 media ownership, 117, 119 drinking water, lack of sanitary, 44 dualist world, 11, 158, 282 early childhood education, 51, 386 Eastern Europe, 23, 24, 26, 31 economic capacity, 253 Economic Commission for Latin America and the Caribbean (ECLAC), 2 economic growth, 187, 190 economic inequality, 7, 8, 53–54 economic opportunity, inequality of, 62–69, 64, 80 economic policies, 248 Ecuador Correa and, 200, 204–6, 213 country risk, 202, 203, 205, 206 economic indicators in, 200 Gini index in, 6 Gutiérrez and, 199–204, 213 human development in, 31 inequality of opportunity in, 68 life expectancy in, 45 oil sector in, 200, 205–6, 271 political transformations in, 265 tax system in, 330 wage increases in, 272

399

education access to, 8 early childhood, 51, 386 elite views of, 97–100, 102 expansion of, 253–54 functions of, in labor market, 52 inequality of opportunity in, 69–74, 71, 73, 80 lack of, 97–98 levels of enrollment, 33 parents’, 70, 72, 76, 80 quality of, 69, 386 quasi-markets in, 267 social policy reform in, 363, 365–67 educational achievement, 69–74, 74, 79, 254, 279 educational incorporation, 247 educational system, structure of, 49–53 egalitarian values, 156, 157 elderly care for the, 350 monetary transfers to, 50 electoral campaigns, 12–13 in Brazil, 218, 223–31, 224 costs of, 217–44, 382 lobbyist contributions to, 221–22, 234–40 political parties and, 220–23 electoral-competition model, 219 main elements of, 218–20 mathematics of, 232–43 results of, 221–23 solution strategy, 220–21 electoral incorporation, 260–61 electoral participation, 247, 255, 259–60, 268 elite culture, 11 elites, 9 attitudes of, toward redistribution, 220 consumption patterns, 252 domestic workers’ rights and, 296 on education, 97–100, 102 emergence of welfare state and, 94–95 perceptions of poverty and inequality among, 89–90, 93–107, 102, 379–80 power of, 4 preoccupation with crime by, 132 redistribution and, 370 representation of, in news media, 125, 129, 130, 132, 133, 134 self-interest and, 387–88 on taxation, 99 El Salvador coalitions behind social policy reforms in, 367–71 diseases in, 42–43 human development in, 31

400

Index

El Salvador (continued) income distribution in, 354, 354 social expenditures in, 357, 358–61 social policies in, 355–57 employment conditions, 35–36 entrepreneurs, 8 epidemiological transition, 42–43 equality, 91–92, 112 The Equity Gap (ECLAC), 2 Equity Plan, 268–69 Europe. See also Western Europe redistribution in, 41 welfare state in, 94–95 excise taxes, 339 executive agencies for women’s rights, 282–85 executives, 8 exogenous cycles, 211–13 export economies, 264 export taxes, 271–72 false consciousness, 149 familialism, 371n4 familial welfare regimes, 351–53, 352 families new types of, 28 social risk faces by, 51 family background, 59, 80 family transitions, 49 Farabundo Marti Front for National Liberation (FMLN), 356 fascism, 246 father, occupation of, 63, 65, 69, 70, 72, 80 fecundity levels, 26, 29, 50, 53 feminist movement, 281–82 feminist organizations, 282 fertility, 25, 26, 29 Filgueira, Carlos, 253 fi nancial crises, 186, 190 fi nancial liberalization, 185–86, 192, 212 Finland, 155, 162, 168, 337 fiscal covenants, 340–42 fiscal policy, 14, 313, 315 foreign payment crises, 334–35 formal employment, 36, 372n12, 386 Fox, Vicente, 260 Fraga, Armínio, 195, 197 Frechette, Myles, 199 Free Trade Agreement of the Americas (FTAA), 197, 201 García Linera, Álvaro, 387–88 gender of journalists, 123–24 representation of, in news, 125–26, 127–28

gender equality, 13, 101, 278–305, 382. See also women’s rights abortion and, 279, 280 achievements in, 278–79 Catholic Church and, 304n1 class divisions and, 288, 302–4, 380 domestic violence and, 279, 280, 288–93 domestic workers’ rights and, 279, 280, 293–98 impact of feminist movements on, 281–82 international context, 287–88 obstacles to, 279 opposition to, 280–81 women’s representation and, 285–87 gender quotas, for representation, 285–87, 304n14 geographic segregation, 8 Germani, Gino, 246 Gini index, 5, 5–7, 58, 217, 224–25, 230, 343n10 attitudes toward inequalities and, 153, 154, 155, 161, 177–78 cost of political campaigns and, 229 group average, 328 increase in, 207 years of schooling and, 69 global capital markets, 12 global economy, 248 global inequalities, 1 globalization, 187–88, 253 Glorious Revolution, 341 government. See also state borrowing by, 340 constraints on, by capital mobility, 188–92, 212 focus on, in news, 131 influence of investors on, 206–11, 212 provision of goods by, 219–20 resources available to, 186, 187 response of, to voter demands, 187 Gramsci, Antonio, 111 gross domestic product (GDP), 218 income inequality and, 218 media access and, 116 oil prices and, 211 personal income taxes as percentage of, 14, 327 revenues as percentage of, 316, 320, 321, 322, 323 social spending as percentage of, 45, 319, 339, 357, 357 Guatemala Gini index in, 6 inequality of opportunity in, 66, 68 media ownership, 117 Gutiérrez, Lucio, 194, 199–204, 213

Index Hakim, Peter, 197 health epidemiological transition in, 42–43 inequality of opportunity in, 74–79, 81 health care access to, 8, 43–44, 47–49 commodification of, 360 quasi-markets in, 267 social policy reform in, 363, 365, 368–69 health insurance, 47–49 health risks, 42–49 hegemony, 111–12, 136 media, 136–37, 139 Heintz, Peter, 246 Honduras, human development in, 31 human development comparison of levels of, 21–34, 23 high levels of, 23–28, 24, 25, 26 impacts of inequality on, 53–54 lower-middle levels of, 31–34, 32, 33 medium levels of, 28–31, 29, 30, 31 Human Development Index (HDI), 55n1 immunizations, 47, 48 import-substitution industrialization (ISI), 245, 249, 258, 260, 264, 265, 342 income, sources of, 62–63 income distribution, 7. See also income inequality impact of social policies on, 353–58 measures of, 5–7 taxation and, 313–43 income inequality, 120 electoral process and, 217–32 GDP and, 218 in Latin America, 6, 58 policy reforms needed to address, 384–89 public opinion on, 147–79, 174–79, 259 societal disagreement on, 153 tax reforms and, 313–43 income mobility, 253–54 income redistribution. See redistribution income taxes income distribution and, 313, 316, 320, 323, 326–27, 335–36, 338, 339, 343n9 social security funding and, 39, 40, 41 incorporation, 245–75, 385–86 challenge of, 263–72 crises of, 13, 246–48, 260–63, 384 educational, 247 electoral, 260–61 of electoral democracy, 255, 255–60 indicators of, 247 labor-market, 249–55 left ist governments and, 263–74

401

political, 260, 340–42 social, 255, 265 incumbency effect, 206 indigenous movements, 203, 297 indirect taxation, 313, 315–16, 323, 324–25, 332–38, 381–82 individual capitalization models, 35–38 individual choices, circumstances and, 59 individualism, 91 individualistic values, 156, 157 industrialization, 265 inequality. See also income inequality and inequality of opportunity as cultural variable, 90–95, 106 decomposition of, 59–60 democracy and, 1, 147–48 economic, 7, 8, 53–54 effects of, 2–3, 378–81 elite perception of, 89–90, 93–107, 379–80 global, 1 impact of social policies on, 353–61 impacts of, on human development, 53–54 income, 58 increases in, 34 in Latin America, 1–15, 217 levels of, 26, 29, 31, 33, 53, 217, 258 manifestations of, 378–81 of outcomes, 60, 78, 371n3 in political representation, 110 politics and, 1, 2–4, 12–13, 377–78, 388 public opinion on, 11–12, 147–79, 259 social, 8, 109–10, 136–37, 148, 172–73 societal disagreement on, 152–56 socioeconomic, 1–2, 4–7 taxation and, 323–32 in working population, 36–42 inequality of opportunity, 10, 58–84 circumstances affecting, 59–62, 64–68, 68, 78, 79–80, 83n13 decomposition of, 66, 67 economic opportunity, 62–69, 64, 80 in education, 69–74, 71, 73, 80 in health, 74–79, 81 versus inequality of outcomes, 371n3 measurement of, 61–62, 81–83, 84n27 infant mortality rate, 25, 26, 29, 44, 45 infectious diseases, 42–43 inflation, 334, 340 informal workers, 8, 9, 35–37, 251, 349, 350, 386–87 information technologies, 252, 252 Institutional Revolutionary Party (PRI), 119 Instituto Trabajo y Familia (ITF), 283 Inter-American Development Bank, 2, 9 interest groups, 220–22, 234–40 intergenerational contract, 36, 37, 38, 44

402

Index

intergenerational mobility, 8–9, 252 International Labour Organization, 288, 294, 298 International Monetary Fund (IMF), 14, 197, 203–4, 313, 333–35, 338, 382 International Social Justice Project (ISJP), 156–57 International Social Survey Program (ISSP), 156–57 Internet, 116, 252 intragenerational contract, 36 investors, influence of, on government choices, 206–11 Izaguirre, Maritza, 208 journalism, cultural norms about, 113, 137, 140 journalists diversity among, 122–24, 123 lack of autonomy for, 136, 137 worldview of, 131 labor care, 48 labor earnings, 62–63, 64, 68–69 labor market changes in, 34 functions of education in, 52 informal workers in, 8, 9, 35–37, 251, 349, 350, 386–87 participation rates, 249, 250 reforms, 35–36 social risks and protections and, 35–42 women in, 28, 53, 249, 250, 251 labor-market incorporation, 249–55 land reform, 104–5 Latin America. See also specific countries commonalities in, 21–22 democracy in, 1, 110, 147, 217, 248, 255, 255–60, 256, 259 developmental levels across, 21–34 inequalities in, 1–15, 217 transformations in, 245–55 left ist governments classification of, 263–66 policy approaches of, 263–72 shift to, 13, 111, 195–206, 212, 245–48, 258–63, 272–74, 384 women’s rights and, 285 left-right political preferences, 158–62, 159–60, 167, 178n5, 219–20, 261 Lewis, Oscar, 92 liberalism, 255 life expectancy, 26, 44, 45, 46, 47 living conditions, in cities, 44 lobby interest groups, 220–22, 234–40 lower classes. See also working class representation of, in news media, 129, 130

low-intensity democracies, 9 Lula da Silva, Luiz Inácio, 194–99, 212–13, 388 machismo, 289 macroeconomic policies, 248 Mahuad, Jamil, 200 Malan, Pedro, 197 male breadwinner model, 351 market-based economy, 5, 8, 186–88 market dynamics, 247 market exchange mechanisms, 247 market expansion, 260, 261 market-productivist welfare regimes, 351–53, 352, 370 market reforms, 265 markets, politics and, 186–88 Marxism, 187 mass media, 109–12. See also media maternity care, 48 maternity leave, 294, 297 mathematics achievement, 72, 74 Medcom, 117 media effects of, on policy making, 137–38 hegemony and, 111–12, 136–37, 139 state-owned, 139, 140 media access, 113–17 media content, 109–10, 112, 113, 381 diversity in, 120–22, 123, 125–35, 140–41 public opinion and, 109–10, 112, 137–38 media diversity, 11, 109–42 in access to types of media, 113–17, 114 components of, 112 in content, 120–22, 125–35, 140–41 geographic diversity, 134, 134–35 idea diversity, 130–35 ownership diversity, 117–20, 139–40 in prime-time network news, 120–22 workforce diversity, 122–24 media firm theory, 140 media framing, 11 median-voter theory, 40, 332 media ownership, 109–10, 112, 113 concentration of, 118, 136–38 diversity in, 117–20, 139–40 media policy, 138–39, 140 medications, access to, 48 men, portrayal of, in news media, 125–26, 128 Menem, Carlos, 301 Mexico attitudes toward inequalities in, 152, 169, 171–72, 175 broadcast television in, 117–19 community radio in, 115 crime in, 132

Index diseases in, 42–43 human development in, 28 media ownership in, 110, 117–20, 138 network television news in, 120–22, 124, 125, 132, 134 social security system in, 37 middle class, 9 consumption patterns, 252 demands of, 247 growth of, 268 media access and, 116–17 social policies and, 349 middle-class women, 296, 299, 301–3, 380 minorities affi rmative action for, 100–101 underrepresentation of, 286 mobile phones, 116, 252 modernization, conservative, 245–46, 260, 265, 274, 384 modernization theory, 246 Mongolia, 31 Moore, Barrington, 245 Morales, Evo, 271, 272 national debt, 340 national income, ratio of appropriation of wealthiest to poorest, 27 Nationalist Republican Alliance (ARENA), 356, 368, 369 neoliberal development models, 5 neoliberalism, 147, 194, 201, 206, 260–61, 271, 273–74 neoliberal tax reforms, 328–32, 338–39 neopluralism, 186–87 network television news competition and quality of, 140 content diversity in, 120–22, 123, 125–35, 140–41 idea diversity in, 130–35 news agendas, 130–35 representation of societal figures in, 125–30, 126–29 workforce diversity in, 122–24, 123 new media, 116 news. See network television news news agendas, 130–35 newspapers, access to, 115–17 Nicaragua human development in, 31 inequality of outcomes in, 78 life expectancy in, 45 nongovernmental organizations (NGOs), 102, 103, 282, 291 nonprofit radio, 115–16 Nordic countries, 149 North Africa, 31

403

nuclear family, 351 nutritional status, 75–80, 77 occupational mobility, 253–54 occupation rate, 249, 251 oil prices, 190, 200, 205, 206, 208–10, 211, 213, 271 oil sector in Ecuador, 200, 205–6, 271 in Venezuela, 191, 207, 208–10, 271 old-age dependency ratio, 24, 33, 34 open economies, 189, 258 opportunities equality of, 100–101 inequality of, 10, 58–84 Ortega, Daniel, 302 Palacios, Alfredo, 200 Panama human development in, 28 inequality of opportunity in, 68 media ownership, 117 Paraguay domestic workers’ wages in, 294 Gini index in, 6 human development in, 28, 31 Partido Liberacion Nacional (PLN), 356 party ideology, 192, 194 paternalism, 266 patriarchy, 253 pension coverage, 38, 363–64, 366–68 Pérez, Carlos Andrés, 207 personal income taxes, 313, 316, 320, 323, 326–27, 338, 339 Peru attitudes toward inequalities in, 169, 176 human development in, 28 inequality of opportunity in, 68 inequality of outcomes in, 78 social security system in, 37–38 tax system in, 330 women’s ministry in, 283 Petróleos de Venezuela (PDVSA), 208, 209, 210 Plan de Equidad, 268–69 Polanyi, Karl, 245, 261 policy making democracy and, 262 income inequality and, 384–89 media effects on, 137–38 policy switches, 189–95, 193, 212, 383 by Chávez, 206–11, 213 currency crises and, 195 by Gutiérrez, 202–4, 213 influence of investors on, 206–11 by Lula, 195–99, 212–13

404

Index

political campaigns in Brazil, 218, 223–31, 224 costs of, 12–13, 217–44, 382 lobbyist contributions to, 221–22, 234–40 redistribution promises made in, 189–92, 194, 207 political community, 91 political crises, 257 political culture, 92, 93 political economy, 264 political incorporation, 260, 340–42 political inequalities, 59 political participation, 247, 255 political parties, 9, 158 electoral campaigns and, 220–23 ideology of, 192, 194 women’s rights and, 285 political power, media ownership and, 113 political representation, 13, 264, 265 social inequality and, 110, 148, 172–73 of women, 279, 285–87 political transformations, 255–63, 272–74 politics of abortion, 300–302 changes in, in Latin America, 5 of domestic violence, 289–93 of domestic workers’ rights, 295–98 inequality and, 1–4, 12–13, 377–78, 388 markets and, 186–88 media structure and, 110, 137–38 of redistribution, 185–213, 377–78, 381–84 “shift to the left” in, 13, 195–99, 200–206, 212, 245, 247–48, 258–63, 272–74, 384 poor underrepresentation of, 286 women, 279, 282–86, 289, 292–93, 299–304, 380 popular consent, 111 populism, 246, 247 populist leaders, 263–64 poverty, 11 childhood, 50 consequences of, 103–4, 104 as cultural variable, 90–95, 106 elite perception of, 89–90, 93–107, 102, 379–80 implications of, for nonpoor, 93 in Latin America, 2, 258, 259 policy options to reduce, 105, 263–72 research on, 93–94 role of state in alleviation of, 102–3 power inequalities, 7 Pozo, Mauricio, 203 preschool education, 51, 386 price controls, 272 professionals, 8

Program of International Student Assessment (PISA), 69–70, 72 progressivism, 248 property taxes, 339 psycho-social divides, 8–9 public goods, 219–20 public opinion, 11 on democracy, 149 explanations for, 156–72 on inequality and redistribution, 11–12, 147–79, 259, 380 left-right political preferences and, 158–61, 159–60, 167 media content and, 109–10, 112, 137–38 Puerto Rico, attitudes toward inequalities in, 177 quality of life, 2–3 quasi-markets, in social sphere, 267 racial discrimination, 101 racial diversity, of journalists, 124 racial minorities, portrayal of, in news media, 126, 129, 129 radical-populist governments, 264, 270–72, 384 radio, 115–17, 139, 141n1 reading achievement, 72–73, 74 redemocratization, 188, 192, 212 redistribution, 4 capital mobility and, 188–92, 211–13 effects of, 355–58 elite attitudes toward, 220 level of inequality and, 148 policies, 248, 355 policy switches about, 192–95, 212 politics of, 185–213, 377–78, 381–84 public opinion on, 11–12, 147–73, 380 room for, 211–13 self-interest and, 156–57, 162, 387–88 societal coalitions and, 348–72 taxation and, 14–15, 315 voter demands for, 185, 188, 203 women’s rights and, 280 Red Solidaria, 369 religious opposition to abortion, 298, 300–302 to women’s rights, 280 Report on Democracy in Latin America (UNDP), 2 reproductive health policies, 299 Roldos, Leon, 204–5 rural-to-urban migration, 254–55 Saca, Antonio, 369 sanitation, lack of, 44

Index school quality, 69 security, 252 self-interest, 156–57, 162, 387–88 senior citizens, monetary transfers to, 50, 54 SERNAM, 284, 290–91 Singapore, 24 single-parent households, 28 social awareness, 95 social campaigns, 270–71 social classes, 219 differences in attitudes toward redistribution among, 156, 158 divisions among, 3, 8–9, 282–83, 286, 301–4, 380 representation of, in news media, 129, 130, 133, 134 social distance and, 158, 161–62 women’s rights across, 282, 286–87 social contract, 387, 388 social democracy, 265, 268–70, 384 social distance, 158, 161, 161–62, 167, 172, 179n7 social exclusion, 9 social expectations, 253 social incorporation, 255, 265 social inequality, 8 mass media and, 109–10 media hegemony and, 136–37 political representation and, 148, 172–73 social insurance, 364, 365, 369 socialism, 187, 206, 209–10, 213 social justice, 178n4, 266 social movements, 264 social policies, 14–15, 380 actors and coalitions behind, 361–70 in Chile, 364–67 in Costa Rica, 361–64 in El Salvador, 367–70 impact of, on inequality, 353–61 income distribution and, 348, 353–58 reasons for failure of, 102, 103 reforms, 349 role of, in redistribution, 362 welfare regime and, 350–53 social protection framework, 31, 33–34, 265 labor market and, 35–42 noncontributory basis for, 38–39 transformations of, 34–54 social relations, 246, 247 social risks, 34, 55n7 education and, 49–53 faced by families, 51 health risks, 42–49 labor market and, 35–42 structure of, 34–53 social security contributions to, 38–41, 55n8

405

coverage, 35–36, 36 expenditures on, 51–52, 54, 381 inequality in, 37–38 quasi-markets in, 267 structure of, 36–42 social spending, 383 allocation criteria for, 358–60, 359 in Costa Rica, 363–64 on education, 52 growth of, 51–52 impact of, on inequality, 353–61 per capita, 28 taxation and, 336–37, 340–41 weight of, across income groups, 360, 360–61 social sphere, quasi-markets in, 267 societal coalitions behind current social policy regimes, 361–70 in Chile, 364–67 in Costa Rica, 361–64 in El Salvador, 367–71 redistribution and, 348–72 social expenditures and, 354–61 societal figures, representation of, in news media, 125–30, 126–28, 129 socioeconomic inequality. See also inequality defi ned, 4 democratic politics and, 1–2 measures of, 5–7 socioeconomic transformations, 249–55 South Asia, 31 Southeast Asia, 23, 28, 31 Soviet-bloc countries, 28, 149 Spain, 170 standard of living, 2–3 state. See also government poverty alleviation and the, 102–3 provision of goods by, 41–42, 219–20 role of the, 9, 106 weakness of the, 262–63 state-based development models, 5 state-owned media, 139, 140 state-protectionist welfare regimes, 351–53, 352, 370 status quo, protection of, 150, 172 stratified universalist state, 26–28 subsidies, 272, 315 Sweden, 337, 340 taxation, 14–15 attitudes toward, 341–42 characteristics of Latin American, 315–28 corporate taxes, 315 distribution effect of, 41

406

Index

taxation (continued) elite views of, 99 export taxes, 271–72 income taxes, 313, 316, 320, 323, 335–36, 338, 339, 343n9 income versus goods/services, 319 indirect, 313, 315–16, 323, 324–25, 332–38, 381–82 inequality and, 323–32, 380 progressive, 186 progressive spending and, 340 revenues from indirect taxes versus GDP per capita, 324–25 revenues from personal income taxes versus GDP per capita, 326–27 social security and, 38–39, 40 tax revenues as proportion of centralgovernment revenues, 317–18 tax revenues by type, 329 total revenue versus GDP per capita, 321–22, 323 value-added tax (VAT), 315, 329, 330, 333–34, 335, 338, 339, 382 tax reforms, 269–70, 313–43, 331, 336 capital fl ight and, 335–36 context and nature of, 314–15 IMF and, 333–35, 338, 382 indirect taxation and, 332–38 neoliberal, 328–32, 338–39 progressive spending and, 336–37 recommendations for, 338–40 redistribution as goal of, 315 Televisa, 118, 119, 138, 141n3 television. See also network television news audiences, 115 cable, 252 national broadcast, 112–13, 115 network news diversity, 120–22 ownership of, 115, 117–20, 118, 136–38 Televisora Nacional, 117 Theil-L inequality index, 64, 82–83 TV Azteca, 132, 138 uncertainty, 190, 191 unemployment, 272 unemployment insurance, 39, 266 unions, 269, 341, 363–64, 367, 369 United Kingdom, 169, 170, 341 United Nations Commission for Latin America and the Caribbean (CEPAL/ ECLAC), 6 United Nations Development Programme (UNDP), 2 United Nations Summit on Social Development (UNDP), 2

United States, attitudes toward inequalities in, 149, 151, 151–52, 157, 163–64, 171, 172 Universal Access to Guaranteed Rights, 269 universal health care, 49 universalism, 268–69 upper classes. See also elites representation of, in news media, 129, 130, 132, 133, 134 social distance and, 158, 161–62 upward mobility, 8–9, 252–54, 349 urban class structure, 8 urbanization, 26, 29, 31, 33, 247, 249, 250, 253 incorporation and, 254–55 Uruguay attitudes toward inequalities in, 176 diseases in, 42–43 human development in, 24 incorporation crisis in, 265 media policy in, 139, 140 network television news in, 120–22, 124, 125, 134 social security system in, 37 tax reform in, 269, 339–40 welfare regime in, 28 women’s ministry in, 283 value-added tax (VAT), 315, 329, 330, 333–34, 335, 338, 339, 382 Vatican, 287 Vázquez, Tabaré, 388 Venezuela attitudes toward inequalities in, 171, 176 capital mobility and, 191 Chávez and, 206–11, 213, 385 country risk, 208 economic crisis in, 207 foreign direct investment, oil prices, and growth in, 211 human development in, 28 media policy in, 138–39 nationalizations in, 210 oil sector in, 191, 207, 208–9, 210 social campaigns in, 270–71 subsidies and price controls in, 272 tax system in, 330 violence, 11 voter apathy, 257 voters electoral decisions of, 232–34 preferences of, 220 wages, 251, 272 Washington Consensus, 13, 246–49, 257–58, 261–64, 273, 349, 377 welfare regimes, 15 deterioration of, 27–28

Index education and, 49–53 in Latin America, 350–53, 351 origins of, in Europe, 94–95 redistribution and, 348–72 types of, 351, 352 Western Europe, attitudes toward inequalities in, 151, 151–52, 157, 163–64, 172 whites, portrayal of, in news media, 125, 126, 129, 129 women autonomy for, 253 care responsibilities of, 293, 350, 386 educational achievements of, 279 in elite positions, 101 in labor market, 28, 53, 249, 250, 251 lack of class unity among, 286–87 middle class, 296, 299, 301–3, 380 oppression of, 253 poor, 279, 282–86, 289, 292–93, 299–304 portrayal of, in news media, 125–26, 127 in public office, 279, 285–87 women’s movements, 281–82 women’s political machinery (WPM), 281–85, 290

407

women’s rights, 13, 278–305. See also gender equality abortion and, 13, 279, 280, 298–302 church opposition to, 280 class divisions in, 288, 302–4 dimensions of, 280, 280 domestic violence and, 13, 279, 280, 288–93, 303 domestic workers’ rights and, 279, 280, 293–98 executive agencies for, 282–85 international context, 287–88 opposition to, 280–81 political parties and, 285 redistribution and, 280 working-age population, 249, 250 working class, emergence of modern, 247 working population, 34, 36–42 World Bank, 2, 197, 203 World Values Survey, 12 worldviews dominant, 111–12 media and shaping of, 137–38 youth, monetary transfers to, 50